Pioneer Natural Resources announced on Tuesday that it has reached an agreement to acquire Parsley Energy for $7.6 billion, including $3.1 billion in debt.
In the all-stock transaction, Parsley shareholders will receive 0.1252 shares of Pioneer common stock for each share of Austin-based Parsley. The deal includes a 7.9% premium to Parsley shareholders based on unaffected shares at closing on Oct. 19, when Parsley shareholders will, in effect, own 26% of Pioneer Resources.
The boards of both companies have already approved the transaction and Quantum Energy Partners, owners of 17% of Parsley’s shares have executed their binding support. The combined company will remain in Dallas as Pioneer Natural Resources and will expand its board to directors to include two new members from Parsley.
Pioneer GC Mark Kleinman tapped Gibson Dunn & Crutcher to advise the Dallas-based energy company. The Gibson team was led from Dallas by M&A partner Jeff Chapman, backed by Houston partner Tull Florey, New York associate Kristen Poole, Dallas associate Paige Lager and Houston associate Jordan Rex.
Partner David Sinak and associate Michael Cannon advised on tax matters from Dallas; partner Krista Hanvey and associate Tyler Richardson advised on benefits, also from Dallas. Houston partner Michael P. Darden, of counsel James Robertson, associates Nathan Zhang and Jordan Silverman and Denver associate Graham Valenta advised on oil and gas aspects. From San Francisco, partner Peter Modlin advised on environmental aspects. New York partner Daniel Angel advised on IP aspects. Washington, D.C. partner Adam Di Vincenzo and counsel Andrew Cline advised on antitrust aspects. Washington, D.C. partner William Scherman and associate Ruth Porter advised on regulatory aspects. Orange County partner James Moloney advised on securities aspects.
Pioneer has retained Goldman Sachs & Co. and Morgan Stanley as financial advisors, while Parsley relied on Credit Suisse Securities and Wells Fargo for financial advice.
Vinson & Elkins represented Parsley on the transaction with a team led by partners Doug McWilliams and Lande Spottswood with assistance from senior associates Mike Marek, Jessica Lewis and Jackson O’Maley and associates David Bumgardner, Markeya Scott, Charlie Fitzpatrick, Carmen Guidry and Mary Busse. Other key deal team members are partners John Lynch, Lina Dimachkieh, Shane Tucker, Bryan Loocke, Matt Dobbins, Devika Kornbacher and Darren Tucker and counsel David Smith, Sarah Mitchell and Damien Lyster.
Parsley Energy’s in-house legal efforts on the merger were led by general counsel Colin Roberts, along with associate general counsel Matt Hendrix and senior counsel Justin Hunter, a V&E alum.
In 2014, a V&E team led by Doug McWilliams advised Parsley Energy in its IPO.
Parsley was founded in 2008 as an unconventional E&P company and has focused its operations in the Permian Basin.
Scott D. Sheffield, Pioneer’s president and CEO said in a release, “This transaction creates an unmatched independent energy company by combining two complementary and premier Permian assets, further strengthening Pioneer’s leadership position within the upstream energy sector. Parsley’s high-quality portfolio in both the Midland and Delaware Basins, when added to Pioneer’s peer-leading asset base, will transform the investing landscape by creating a company of unique scale and quality that results in tangible and durable value for investors.
Matt Gallagher, Parsley’s president and CEO said the merger will “forge a strong new link at the low end of the global cost curve.” He said sutainable free cash flow and return on capital are now investment prerequisite in the energy sector.
“With neighboring acreage positions located entirely in the low-cost, high-margin Permian Basin, the industrial logic of this transaction is sound. Furthermore, the Pioneer team shares our belief that a clear returns-focused mindset is the best tool to compete for capital within the broader market.”
The two companies said that by combining, they expect the enhanced cash flow to help lower the reinvestment rate 65% to 75% at strip pricing, with annual savings of $325 million from combining operational structures.
But the main attraction is that by combining, Pioneer will increase proved reserves by 65%.