Pioneer Natural Resources (PXD) is currently in discussions to buy Parsley Energy, reports the Wall Street Journal, which cites people familiar with the matter.
According to the Wall Street Journal sources, the two shale producers are considering an all-stock deal that could be completed by the end of the month if the talks don’t fall apart.
Both oil-and-gas companies have operations in the Permian Basin of Texas and New Mexico- and the deal would be the latest tie-up for a rapidly consolidating industry which has been hit by a drastic fall in oil prices.
For instance, earlier this month, ConocoPhillips announced a massive $9.7 billion acquisition of shale producer Concho Resources in an all-stock deal.
Should Pioneer and Parsley (PE) join forces, it would create a company capable of producing about $10 billion in combined revenues and production of more than 550,000 barrels of oil equivalent a day, says The Financial Times.
Shares in Pioneer dropped 3.6% in Monday’s trading, while Parsley dropped 2%. Overall, on a year-to-date basis Pioneer has plunged over 42% but the stock scores a bullish Strong Buy Street consensus. That’s with an average analyst price target of $122 (40% upside potential).
RBC Capital analyst Scott Hanold recently published a buy rating on Pioneer Natural Resources with a $120 price target (38% upside potential).
“A leading operator in the Permian with one of the largest, most contiguous positions in the Midland Basin provides PXD with a deep inventory of high-tier assets. We think this scale provides a strong advantage over its peers” the analyst comments.
He believes that the company’s production growth profile, balance sheet, and free cash flow generation are best- in-class, and that ultimately this should enable Pioneer to outperform peers. (See PXD stock analysis on TipRanks)
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