Page 5 - NorthAmOil Week 44 2021

NorthAmOil COMMENTARY NorthAmOil

“I think the move speaks to Continental’s 100% focused on its high-margin, high-re-
need to add inventory and the challenges of turn Midland Basin assets, where we have the
finding it in scale in the basins where they cur- largest acreage position and drilling inventory.
rently operate,” Enverus senior mergers and Proceeds from this divestment will be used to
acquisitions (M&A) analyst Andrew Dittmar further strengthen Pioneer’s balance sheet,
was quoted by Reuters as saying. improving our already strong leverage metrics,”
Bloomberg Intelligence analysts, meanwhile, Sheffield stated.
commented that the deal was troubling, because
it “dilutes the buyer’s Williston and Anadarko Strong performances
portfolios while introducing the uncertainty of As well as the Delaware Basin transaction,
a relatively modest position where Continental both Pioneer and Continental reported strong
has limited operating experience”. third-quarter results, bolstered by crude prices
at multi-year highs.
Shifting focus Pioneer reported net income of $1bn for the
For Pioneer, the sale comes after it significantly third quarter, up from a loss of 85mn in the
built up its own Permian position through same quarter a year ago. Its production almost
two M&A deals earlier this year. The company doubled year on year from 354,968 boepd to
acquired Parsley Energy for $4.5bn in January 675,793 boepd. Its average price rose from For Pioneer, the
and DoublePoint Energy for $6.2bn in May. The $28.22 per boe a year ago to $52.79 per boe in
DoublePoint acquisition bulked up Pioneer’s the third quarter of 2021, with the price per bar- sale comes after
presence in the Midland Basin, where it is now rel of oil up from $39.22 to $69.24 over the same it significantly
the largest acreage holder. The Midland will now period.
be its sole focus. The Parsley acquisition, mean- Continental, for its part, posted net income of built up its own
while, includes Delaware Basin assets that will $369mn for the third quarter of 2021, up from
now be handed over to Continental. a loss of $79mn a year ago. Its production rose Permian position
However, offloading its Delaware Basin assets to 331,407 boepd from 297,001 boepd y/y, but
comes at a cost – Pioneer said it expected to rec- notably, this was driven by rising gas output, through two M&A
ognise a pre-tax loss of $900mn to $1bn that which rose from 766mn cubic feet (21.7mn deals.
would be associated with the sale. Consultancy cubic metres) per day to 1bn cubic feet (29.6
Energy Intelligence noted that the size of the loss mcm) per day over the period. Meanwhile,
was “notable” given that the Parsley acquisition its oil production fell from 169,265 bpd in the
was so recent, adding that the valuation of that third quarter of 2020 to 157,153 bpd in the latest
merger had been criticised in some quarters. It quarter.
noted that in any case, the Delaware Basin sale Indeed, the company noted that in Okla-
to Continental would provide Pioneer with homa in particular it had made “a deliberate
extra funds to bolster its balance sheet. pivot to capture gas commodity strength”. All
This was echoed by Pioneer’s CEO, Scott of Continental’s rigs in Oklahoma will be tar-
Sheffield. geted at gas in the fourth quarter, versus 50%
“This transaction returns Pioneer to being in the second quarter.™

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