US oil producer Pioneer to buy rival DoublePoint for $6.4bn

Pioneer Natural Resources, one the biggest independent oil operators in the US, is to buy rival Texan producer DoublePoint Energy in a $6.4bn cash and stock deal, as consolidation in the country’s battered shale patch rolls on.

Pioneer said on Friday the acquisition would give it “unmatched” scale in Texas’s Permian Basin, the world’s most prolific oil-producing region.

Private equity-backed DoublePoint, which hosted Donald Trump during a presidential visit to Texas last July, was one of the Permian producers to increase production through last year’s price crash, which briefly left US oil prices trading below zero.

Pioneer said that, despite its fast-expanding footprint in the Permian, it would stick with its own plan for modest output growth.

“Pioneer will incorporate these assets into our investment model, migrating the assets from significant production growth to a free cash flow model, moderating growth for the US shale industry and generating significant value for our shareholders,” said Scott Sheffield, Pioneer’s chief executive.

In January, Pioneer completed a deal for Parsley Energy, another large Permian producer, in a $7.6bn acquisition that led to Sheffield’s company merging with one founded by his son, Bryan Sheffield.

Last year’s oil price crash triggered scores of bankruptcies across the shale patch, a sharp fall in production, and a wave of mergers and acquisitions. More than $50bn of deals were struck in the second half of 2020, according to data provider Enverus.

Seeking to win back investors that fled the sector in recent years, shale operators have pledged that an era of debt-fuelled drilling and negative cash flow is over, replaced with a focus on slow production growth and high returns.

DoublePoint, backed by private-equity groups Quantum Energy Partners and Apollo Global Management, was among the non-listed Permian producers able to buck that trend last year and increase production.

Pioneer, which produced 370,000 barrels a day of oil and gas in 2020, said DoublePoint’s production would reach 100,000 b/d by the end of June.

Pioneer’s offer comprised 27m in shares, $1bn in cash and the assumption of $900m in debt. Cost savings from the deal would be $1bn over 10 years.

Pioneer said the deal would allow for an increase in the variable dividend paid to shareholders from 2022.

Andrew Dittmar, senior M&A analyst at consultancy Enverus, said: “There have been concerns about the rate that private companies are increasing drilling and its potential to lead to an oversupplied market . . . Roll-ups of these high-growth private companies by public E&Ps focused on fiscal discipline is certainly one way to address that concern.”

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