Two billion-dollar-plus deals were announced in the oil patch this week, a sign that higher commodity prices are having some effect on the M&A market.
Pioneer Natural Resources Co. said Nov. 3 that the company entered into a definitive agreement to sell all of its assets in the Delaware Basin to Continental Resources for cash proceeds of $3.25 billion, making Pioneer a 100% Midland Basin operator.
And today, Nov. 4, Southwestern Energy said that it agreed to buy Blackstone-backed GEP Haynesville, the third largest private producer in the area, for about $1.85 billion in cash and shares, continuing a spate of deals in the east Texas/northern Louisiana region.
The Pioneer-Continental transaction is expected to close toward the end of the fourth quarter if it clears regulators, among other things. Proceeds will be used to further strengthen Pioneer’s balance sheet, allowing the company to enhance shareholder return, Piper Sandler analyst Mark Lear said in a note. The company will book pretax loss of $900 million to $1.1 billion associated with the divestiture.
The Southwestern-GEP Haynesville transaction is expected to close by year-end 2021 if it also clears regulators. Southwestern said it will build further scale in the Haynesville, expand exposure to the LNG corridor and growing demand centers along the Gulf Coast, came at an attractive valuation and is expected to improve free cash flow per share and cash flow per share by about 15% by next year.
Tudor Pickering Holt said the deal was not unexpected given Southwestern management’s openness with free cash flow allocation to continue scaling up, with the company highlighting opportunities in Appalachia and the Haynesville in recent quarters following the Indigo transaction in June.
Pioneer hired BofA Securities Inc. as financial advisor. For legal advice, the company turned to Vinson & Elkins led by partners John Grand and David Cohen and counsel Elena Sauber with assistance from associates Anne Jensen, Alex Turner, Daryne Foote and Kelly Reddington.
Other team members included partner Robert Kimball, senior associates Joanna Enns and Alex Robertson and associate Cameron Land on securities; partners Jim Meyer and Todd Way and associate Jeff Slusher on tax; partner Chris Dawe on finance; and partner Larry Nettles on environmental.
Also assisting were partner David D’Alessandro and senior associate Missy Spohn (executive compensation/benefits); partner Sean Becker and counsel Christie Alcalá (labor/employment); partner Darren Tucker and counsel David Smith (antitrust); partner Matt Stammel, senior associate Stephanie Noble and associate Carly Goodson (litigation); partners John Decker and Mike Tomsu (energy regulatory); and counsel Rajesh Patel (technology transactions/IP).
White & Case advised Continental, including Houston partners Mingda Zhao and Emery Choi and associates Leslie Vaughn, Chris Hebert, Clint Farha and Helen Xiang.
They were aided by partner Charlie Ofner and associate Danny Hatch on project development and finance, partner Taylor Pullins on environmental, partner Jason Rocha and associate Stephen Perry on capital markets, partner Mark Holmes on debt finance and partner Chad McCormick and associate Neil Clausen on tax, all of Houston, with support attorneys in Washington, D.C., and New York.
Citi is Continental’s financial advisor, including Steve Trauber, Muhammad Faisal Laghari, Claudio Sauer, Tony Fernandez and Alexander Burpee.
Goldman Sachs served as the strategic advisor to Southwestern, including Suhail Sikhtian. JP Morgan, Bank of America, Citigroup, RBC and Wells Fargo were financing advisors and provided $1.325 billion committed financing in connection with the transaction. Intrepid Partners also provided a fairness opinion to Southwestern.
Credit Suisse served as the exclusive strategic and financial advisor to GEP, including Tim Perry and Derek Dease. Skadden, Arps, Slate, Meagher & Flom served as legal advisor to Southwestern and Kirkland & Ellis served as legal advisor to GEP.
The Skadden team was led by M&A partners Frank Bayouth, Eric Otness and Cody Carper and associates Christopher Baeza, Nicholas Woodruff, Paul Kieffer and Laura Sunday, all in Houston, with support staff in Los Angeles, New York and Washington, D.C.
Chris Lacy is general counsel at Southwestern, having taken over from John Ale, who retired last year and was a previous partner at Skadden in Houston.
The Kirkland team was led by corporate partners Andy Calder, John Pitts and Courtney Roane; debt finance partner Mary Kogut; capital markets partners Julian Seiguer and Matthew Turner; real asset partners Anthony Speier and Chris Heasley; and tax partners David Wheat and Joe Tobias.
Russell Buehrle is general counsel at QEP Haynesville. He previously was counsel at GeoSouthern Energy, Blackstone’s joint venture partner in QEP Haynesville, and before that was a staff attorney at Encana.
Gibson Dunn & Crutcher advised Intrepid led by partner Hillary Holmes.