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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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This Deal Could Create The Next Big Shale Giant

Just a day after ConocoPhilips announced it will buy Concho Resources, another U.S. oil major was reported to be in talks to buy a fellow driller.

Pioneer Natural Resources is negotiating the acquisition of Parsley Energy, the Wall Street Journal reported late on Monday, citing unnamed sources familiar with the talks. According to them, the deal would be an all-stock transaction and could be finalized by the end of the month.

Parsley Energy has a market value of some $4.17 billion and about $3.123 billion in long-term debt. The company reported a net loss of close to $400 million for the second quarter on lower production and the suspension of all new drilling in May and June amid the slump in oil demand.

Pioneer, on the other hand, has a market cap of over $14 billion and a net debt load of some $2 billion. Like most of the industry, it also reported negative earnings for the second quarter and some free cash flow, which, like earnings, was a rarity during the period.

A second deal between companies of this size would likely reinforce a nascent change of sentiment towards the oil and gas industry in the United States. Consolidation is usually the second thing companies do after they cut their workforce in a crisis, but this time the consolidation step has been slow in coming.

Reports first emerged last week that Conoco was in talks to buy Concho Resources. This week the two confirmed them. The all-stock deal is valued at $9.7 billion, making it the largest acquisition in the industry so far this year. Before it, Devon Energy struck a $2.6-billion merger deal with WPX Energy. A couple of months earlier, Chevron bought Noble Energy for $5 billion. It appears the consolidation drive is gathering pace, as oil prices remain lower than is comfortable for many small producers but high enough to motivate M&A activity.

By Irina Slav for Oilprice.com

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