Pioneer Natural Resources Co. (PXD) has made a buyout offer to Pioneer Southwest Energy Partners LP(PSE) with the goal of consolidating the companies' properties in the Midland Basin in West Texas.
PXD said such a consolidation "would facilitate Pioneer's plans to fully and optimally develop the area and would provide organizational, operational and administrative efficiencies." PXD owns 100% of the general partner and about 52.4% of the 35.7 million outstanding common units of PSE.
PXD would exchange shares for all of the outstanding publicly held units of PSE at a ratio of 0.2234 PXD share per each PSE unit. The offer values PSE at $1.1 billion, representing an 18% premium to the May 7 valuation, according to Wells Fargo Securities. The proposed transaction would be structured as a merger of PSE with a wholly-owned subsidiary of PXD.
PXD operates PSE's assets, which are in the Spraberry trend, mainly in Martin and Midland counties, Wells Fargo said. The deal "would allow for more efficient exploitation of underlying resources through horizontal drilling on the properties as a full horizontal program would have been cumbersome under the MLP [master limited partnership] structure given upfront capital requirements," Wells Fargo said in a note.
PXD is the largest acreage holder and producer in the Spraberry field, with interests in more than 7,000 active wells, according to the company. It processes its gas production through the Midkiff/Benedum gas processing system, in which it holds a 27% interest. The company's Spraberry production is 70% oil and represents about 40% of PXD current production and about 55% of total proved reserves.