Pioneer Natural Resources Co. has signed an agreement with Sinochem Petroleum USA LLC, a U.S. subsidiary of China’s Sinochem Group, to sell 40% of its interest in 207,000 net acres leased by the Pioneer in the horizontal Wolfcamp Shale in the southern portion of the Spraberry Trend Area Field for $1.7 billion.
Separately, Pioneer has abandoned efforts to sell its Barnett Shale assets after failing to secure an acceptable offer.
At closing, Sinochem would pay $500 million in cash to Pioneer before adjustments and pay the remaining $1.2 billion by carrying a portion of Pioneer’s share of future drilling and facilities costs. Wells Fargo Securities analyst Gordon Douthat said in a note last week the deal values the acreage at about $17,000 per acre. “This is ahead of the $12,000/acre that we had incorporated into our NAV [net asset value] estimate, and we believe Street expectations were in the $10,000-15,000/acre range.”
The transaction is expected to close during the second quarter, subject to customary approvals. Sinochem would acquire about 82,800 net acres of leasehold held by Pioneer for all Wolfcamp depths and deeper horizons. Pioneer retains 60% of its interest in the Wolfcamp depths and deeper horizons, with Sinochem receiving 40% of Pioneer’s interest.
Pioneer would continue as operator and conduct all leasing, drilling, completion, operations and marketing activities in the JV area, which covers portions of Upton, Reagan, Irion, Crockett and Tom Green counties in Texas. Pioneer retains its current working interests in all horizons shallower than the Wolfcamp horizon.
In addition to funding its drilling obligations for the horizontal Wolfcamp, Sinochem agreed to fund 75% of Pioneer’s portion of drilling and facilities costs after closing until the $1.2 billion of drilling carry is used. Pioneer has six years to use the drilling carry, subject to extension under some circumstances. Pioneer and Sinochem agreed to a development plan that forecasts drilling 86 horizontal Wolfcamp Shale wells during 2013, increasing to 120 wells in 2014 and 165 wells in 2015.
Separately, Pioneer, which last September said it was pulling up stakes in the Barnett Shale to focus on greener pastures, said it was abandoning its Barnett asset sale effort after failing to receive a suitable offer. Last September the company said a Barnett sale would allow it to allocate capital to higher-return projects (see NGI, Sept. 10, 2012). Pioneer holds about 155,000 gross acres in the play, of which about two-thirds are in the Barnett Combo.
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