Advertisement

Pioneer (PXD) in Talks to Buy Parsley: What You Should Know

Pioneer Natural Resources Company PXD is considering the acquisition of smaller rival Parsley Energy, Inc. PE, per the Wall Street Journal. The current market volatility might trigger some more acquisitions in the oil and gas space.

The all-stock acquisition deal is expected to be completed by month end, as reported by the people familiar with the matter to the Wall Street Journal. A big $14.8-billion upstream company, Pioneer’s acquisition of Parsley Energy — a $4.3-billion company — will likely lead to the creation of one of the biggest producers in the famous Permian Basin. Earlier this year, Parsley Energy acquired smaller rival Jagged Peak Energy in an all-stock deal worth $1.8 billion.

The latest move is expected to boost Pioneer’s oil-rich Permian Basin acreages. The acquiree currently owns roughly 248,000 net acres in the Permian Basin - 137,000 acres in the Midland Basin and 111,000 acres in the Delaware Basin. As of year-end 2019, Parsley Energy’s proved reserves totaled 592.3 million barrels of oil equivalent (MMBoe), of which 55% was oil, 20% was natural gas and 25% was natural gas liquids.

Now, a question may arise whether Pioneer’s balance sheet can support such an acquisition. At the end of second-quarter 2020, the cash balance totaled $180 million. Long-term debt summed $2,054 million, reflecting a debt to capitalization of 15.7%. The upstream energy player’s debt to capitalization has been persistently lower than the industry over the past few years, reflecting considerably lower debt exposure. Despite an unfavorable business scenario owing to coronavirus-induced dented energy demand, the company is capable of clearing long-term debt with the cash balance and $1.5 billion of credit facilities.

What about Parsley Energy's balance sheet position?

Parsley Energy’s total debt is currently around $3.4 billion, with only $159 million in cash & cash equivalents. Importantly, the company's debt to capitalization as of the end of the second quarter was 44.9%, deteriorating from 42.3% three months ago.

Trend of Acquisitions

The present market situation might allow Pioneer to acquire rich shale assets at beaten-down prices. In fact, we have witnessed some other merger and acquisition (M&A) deals in this turbulent period. Recently, ConocoPhillips COP agreed to acquire Concho Resources Inc. in an all-stock deal. Chevron Corporation CVX proposed a more than $5 billion merger deal with Noble Energy for the latter’s Eastern Mediterranean assets. In another deal, Canadian Natural Resources Limited recently agreed to acquire all issued and outstanding common shares of its smaller rival, Painted Pony Energy.

Price Performance

Pioneer’s shares have increased 18.5% in the past six months compared with 13.2% rise of the industry it belongs to. The company currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Chevron Corporation (CVX) : Free Stock Analysis Report
 
ConocoPhillips (COP) : Free Stock Analysis Report
 
Pioneer Natural Resources Company (PXD) : Free Stock Analysis Report
 
Parsley Energy, Inc. (PE) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research