Pioneer Natural Resources Acquires Midland Basin Acreage with $827 Million Secondary Offering
Devon Energy Corp. has been piling up the assets sales so far in 2016, announcing on June 15, 2016, the most recent divestiture of assets in the Midland Basin for a cumulative $858 million. This is comprised of two separate transactions, both in the Midland Basin.
In the northern Midland Basin, Devon reached an agreement with Pioneer Natural Resources to divest Devon’s working interest across 15,000 net acres in Martin County, Texas along with 13,000 net acres in eight surrounding counties for $435 million. Current net production associated with this largely undeveloped leasehold position is approximately 1,000 Boe per day, with oil accounting for roughly 70%. The total deal equates to a price of $15,535 per acre. Pioneer said it plans to boost drilling in the area by 42 percent to 17 rigs later this year.
In a second transaction, Devon divested assets in the southern Midland Basin for $423 million. Current production from these assets is approximately 22,000 Boe per day, of which 33 percent was oil. At Dec. 31, 2015, proved reserves associated with these properties totaled 43 million Boe. Field-level cash flow accompanying these assets, which excludes overhead costs, amounted to $13 million in the first quarter of 2016.
Devon has now announced $42.1 billion in assets sales in 2016. Devon also raised capex guidance by $200 million and increased production guidance for 2016 by 7,000 Boe/d. Devon will use part of the proceeds to boost investment in the Delaware Basin.
Devon CEO and President Dave Hager said the asset sales are “highly accretive” and conclude its non-core divestiture program ahead of schedule. “We anticipate our total non-core asset sales to be at or above the top end of our $2 billion to $3 billion guidance with the sale of our 50% interest in the Access pipeline. With the success of our E&P asset sales, we are now in the planning stages to increase our upstream activity by approximately $200 million in the second half of this year,” he said in a statement.
Pioneer Issues Equity to Finance Transaction
Following the announcement of Pioneer’s acquisition, the company announced a secondary equity offering to finance the transaction. Pioneer will issue 5.25 million shares of common stock for gross proceeds of approximately $827 million. An additional 787,500 shares will be offered as an option to the underwriters. The company expects to use a portion of the proceeds from the offering to fully fund its pending acquisition in the Midland Basin and the remaining portion of the proceeds for general corporate purposes, including funding the drilling program on the acreage to be acquired and continuing to develop its acreage position in the Spraberry/Wolfcamp play in West Texas.
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