© 2013 The Texas Lawbook.
By Mark Curriden
Senior Writer for The Texas Lawbook
Irving-based Pioneer Natural Resources announced Wednesday that it has reached a deal to sell 40 percent of its interest in its Texas Wolfcamp Shale assets to Chinese-based Sinochem Group for $1.7 billion.
The deal is Sinochem’s first in oil and gas exploration and development. It is Pioneer’s second such transaction with a foreign investor, as the company did a similar kind of joint venture with Reliance Industries of India in 2010 for $1.3 billion.
Pioneer General Counsel Mark Berg, in a phone interview Wednesday evening with The Texas Lawbook from Beijing where he was working on the deal, said the transaction is part of Pioneer’s long-term strategic plan to raise capital as the company starts drilling in the Wolfcamp Shale this year.
Pioneer plans to drill 86 horizontal wells this year and 285 more wells by the end of 2015.
Berg said that the agreement calls for Sinochem to pay $500 million in cash to Pioneer, which retains a 60 percent ownership in the assets, upon closing. In addition, Sinochem also agrees to pay its 40 percent of the drilling costs and three-fourths of Pioneer’s 60 percent share of the drilling costs up to $1.2 billion.
Contract negotiations started in early January and the deal is expected to close during the second quarter of this year.
While there have been many of these kind of joint venture agreements between natural gas companies and outside investors, Berg says no two are identical.
“Everyone of these deals is different,” Berg says. “The issues may be common, but every deal focuses on the specific nature of the assets and the specific needs of the parties.
“The primary hurdle here is that we are establishing a long-term relationship with a new investor,” he says. “What’s been interesting is that you would think there would be a lot of differences because we are an American company and they are a Chinese company, but we have found a lot of organizational management and strategic similarities.”
Berg says he selected Vinson & Elkins as the outside firm to lead the transaction because the law firm had represented Pioneer in its similar deal with Reliance and because V&E has experience representing Chinese-owned energy companies, including SINOPEC and CNOOC.
Berg specifically gave a shout out to Houston corporate law associate Mingda Zhao, who speaks fluent Mandarin Chinese and was extremely helpful during negotiations. Zhao, a fifth year associate, also worked on Chesapeake Energy’s $3.3 billion joint venture with Norwegian energy firm Statoil Hydro in 2008.
V&E M&A partner David Cohen led the transaction for Pioneer. Other V&E lawyers playing significant roles are energy transactions partners Shay Kuperman and Marcia Backus, corporate finance partner Chris Dawe, antitrust law partner Billy Vigdor, and tax law partners Tom Crichton and Todd Way.
Mayor Brown is representing Sinochem.
© 2013 The Texas Lawbook. Content of The Texas Lawbook is controlled and protected by specific licensing agreements with our subscribers and under federal copyright laws. Any distribution of this content without the consent of The Texas Lawbook is prohibited.