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PE Announces 2nd Permian Acquisition in Less than a Month

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PE Announces 2nd Permian Acquisition in Less than a Month PART 1 OF 3

PE Announced 2nd Permian Acquisition in Less than a Month

Parsley Energy’s Permian acquisition

On February 7, 2017, Parsley Energy (PE) announced that it had agreed to acquire 71,000 net acres in the Midland Basin, located within the larger Permian Basin, from Double Eagle Energy Permian. Parsley will pay $2.8 billion in exchange for the acquired assets.

The acquisition would bring PE’s total net acreage position in the Permian to ~227,000 acres. Key Permian players include Apache (APA), Concho Resources (CXO), and Chevron (CVX).

PE Announced 2nd Permian Acquisition in Less than a Month

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How Parsley will benefit

The assets under consideration had an estimated net production of ~3,600 barrels of oil (USO) (UCO) equivalent per day (Boe/d) as of January 1, 2017. Considering a production level of 43,000 Boe/d reported in the Permian Basin in 3Q16, PE’s production with the added assets will increase by 8%.

Moreover, the acquisition would also result in 7,900 net horizontal drilling locations, which includes approximately 4,300 net locations in areas such as Wolfcamp A and Wolfcamp B in the Midland Basin and Upper Wolfcamp in the Southern Delaware Basin. Another company that will be focusing on the Wolfcamp in 2017 is EP Energy (EPE).

Parsley believes it now has a sufficient footprint to support more than 20 horizontal rigs. It expects to add four rigs by the end of 2017, translating to ~40 incremental horizontal well spuds in 2017, all of which would be located in the Midland Basin. Ten of these incremental wells are expected to begin production this year. The increased drilling and completion activity won’t have a major effect on production until 2018. In the above image, we can see PE’s historical and projected rig activity this year.

Other highlights of the acquisition

Parsley will pay $1.4 billion in cash and will offer approximately 39 million shares of its common stock, valued at ~$1.4 billion. The company intends to finance the cash portion of the transaction via equity and debt offerings.

Parsley considers its latest acquisition to be its “largest acquisition to date” and expects to close it by April 20, 2017.

Following the news, PE increased its 2017 production guidance by 5,000 Boe/d to a range of 62,000 to 68,000 Boe/d. It updated its 2017 capital program to a range of $1 billion–$1.15 billion, from a previous range of $750 million–$900 million. Continue on to the next part to read about another acquisition by PE, which it announced less than a month ago.

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