Page 4 - NorthAmOil Week 44 2021

NorthAmOil COMMENTARY NorthAmOil

Pioneer to sell Delaware

Basin assets to Continental

in shale mega-deal

Pioneer Natural Resources has struck a deal to sell its assets in the

Permian’s Delaware sub-basin to Continental Resources for $3.25bn

PERMIAN BASIN A large parcel of shale assets in the Permian
Basin is set to change hands after Pioneer Natural
WHAT: Resources struck a deal to sell its holdings in the
Pioneer is selling all of its Delaware sub-basin to Continental Resources
Delaware Basin assets to for $3.25bn in cash.
Continental for $3.25bn. The deal was announced at the same time as
the two companies reported their third-quar-
WHY: ter results, and illustrates the fact that higher
High oil prices appear to oil prices continue to encourage major shale
have encouraged large- transactions. For Continental, the acquisition
scale deals to continue. will mark an entry into the Permian, where it
does not currently have a presence. Pioneer, for
WHAT NEXT: its part, will focus on its assets in the Midland
Continental will expand Basin, also a sub-basin of the Permian.
into the Permian for the
first time, while Pioneer Major deal
will focus on its Midland The assets changing hands consist of around
sub-basin assets. 92,000 net acres (372 square km), which are
contiguous and primarily located across Texas’
Pecos, Reeves and Ward counties. Also included
are roughly 50,000 net royalty acres (202 square
km) and “extensive” owned water infrastructure,
according to Continental. Source: Continental Resources
The assets include more than 650 gross oper-
ated locations targeting the Third Bone Spring most recently, the Powder River Basin. In addi-
and Wolfcamp A and B plays, and more than tion to the competitive geologic attributes, this
1,000 locations overall. They currently produce transaction is accretive on key financial metrics
50,000 barrels of oil equivalent per day (boepd), and supports our long-term target of 1.0x net
with oil accounting for around 35,000 barrels debt to EBITDAX by year end 2022 at $60 WTI
per day (bpd), or roughly 70%. Continental also [West Texas Intermediate].”
noted that 98% of the acreage is operated, 90% Continental anticipates that the acquisition
is held by production (HBP) and that proven, will add up to 2% per year to projected return on
developed, producing (PDP) reserves represent capital employed. It expects the assets to gener-
around 75% of the transaction price. This puts ate $75mn per year of cash flow from operations
the deal’s price tag at around $8,800 per acre and $500mn per year of free cash flow (FCF) in
($2.2mn per square km). 2022 at current prices.
“Continental’s foundation has always been The transaction comes as operators explore
built upon a strong geology-led corporate strat- options for boosting profitability without signif-
egy. This continues today and has directly led icantly ramping up drilling on existing acreage.
us to our new strategic position in the Permian Building scale by acquiring nearby acreage has
Basin,” stated Continental’s CEO, Bill Berry. “This been a popular choice among some shale drill-
acquisition will complement our existing deep ers, but in other cases, so has moving into alto-
inventory portfolio in the Bakken, Oklahoma and gether new areas.

P4 www. NEWSBASE .com Week 44 04•November•2021