Sometimes the way reporters on Capitol Hill view things out here in fly-over country is far different than those of us who live and work here.
Take for example how POLITICO in Washington, D-C reported this week’s move by Pioneer Natural Resources to acquire Parsley Energy:
“As sure as night follows day, a downturn in the oil cycle sends hard-hit oil producers clamoring for partners. Tuesday’s match-up has Irving, Texas-based Pioneer Natural Resources setting a deal to buy Parsley Energy in an all-stock transaction valued at roughly $4.5 billion, paying a thin premium that values Parsley at a level seen only a few weeks ago.
The deal — which needed some special arms-length accommodations since Pioneer CEO Scott Sheffield is the father of Parsley co-founder and Chairman Bryan Sheffield — is the latest in what looks like a mad dash to lock up the premium Permian Basin acreage while prices are low. Those fields remain the prize in U.S. oil patch, and ME is certain that ambitious investment bankers and cash-strapped West Texas companies are looking to strike deals — which may be harder and harder to come by as the best companies get snapped up.
Adding in Parsley’s debt brings the deal total to $7.6 billion, and the companies are eyeing $325 million in annual savings as they manage an asset base of 930,000 acres in the Permian Basin, where production has started to rebound after the price shock that hit the industry this spring.
The deal follows a reconfiguration of the shale industry that’s seen ConocoPhillips buy Concho Resources Inc. earlier this week valued for $9.7 billion, a deal that came on the heels of Devon Energy’s link up with WPX Energy. “There’s really going to be three or four players left in the U.S. independent sector,” Sheffield told The Wall Street Journal on Tuesday .
While companies with stable finances may be kicking the tires on potential targets, it will get tougher to find acreage that can produce oil at the prices it’s fetching now. Adam Waterous, the founder of private equity firm Waterous Energy Fund, told the newspaper there’s no market for about 80 percent of the roughly 500 oil and gas producers in North America, many of which bought into fields when prices were far more robust. “The vast majority of these are not good assets,” he told the Journal.”
Source: POLITICO