A day after ConocoPhilips (COP) announced it would buy big Permian Basin oil shale play Concho Resources (CXO) for $9.7 billion, the Wall Street Journal reported that Pioneer Natural Resources, by some measures the biggest oil shale operator in the Permian Basin, is in talks to acquire Parsley Energy (PE), another Permian Basin producer. (After the close today, we got confirmation of the deal with a price of $4.5 billion.)
Today, October 20, shares of Parsley Energy were up 5.25%. Shares of Pioneer were down 4.06% at the close.
The acquisition, the Wall Street Journal reported, would be an all-stock deal and could be finalized by the end of October.
Parsley Energy has a market value of some $4.17 billion with $3.1 billion in long-term debt. The company reported a loss of nearly $400 million for the second quarter.
Pioneer has a market cap of $14 billion and net debt of about $2 billion. Earnings for Pioneer were negative in the second quarter, although the company did report positive free cash flow.
A second deal in the Permian Basin would certainly reinforce a narrative of continued consolidation even among the biggest and best oil shale players (a group that I’d say includes Concho, Parsley, and Pioneer.)
Whether it would change the Wall Street story enough so that traders would begin bidding up the price of other acquisition candidates remains uncertain. Watch stocks such as Diamondback Energy (FANG), up 1.46% today, to track sentiment on that story.
Parsley Energy has been a member of my Jubak Picks Portfolio since April 17, 2019. The shares are down 49.1% during that period.