Irving-based Pioneer Natural Resources, already big in Permian oil, just got bigger
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Oil and gas companies — and their customers — who are wondering if the recent rise in crude oil prices will have an impact on Texas production got a clue Wednesday: Dallas-based Pioneer Natural Resources just announced it’s buying 28,000 acres in the Permian basin.
The property belongs to Oklahoma City-based Devon Energy. Devon has been selling what the company calls “non-core assets” for the past year in an effort to strengthen its balance sheet.
Pioneer was one of the pioneers in developing shale oil and gas resources in West Texas. Last month, longtime CEO Scott Sheffield announced his plans to retire at the end of the year. Under his leadership, the company shifted its exploration mostly away from non-Texas fields and focused increasingly on the Permian.
Last month, Sheffield said he remained confident in the value of the Permian fields and said it would take $60 a barrel oil to see full production resume. Crude prices this week are bouncing a bit below $50 a barrel.
In a news release, Pioneer says it plans to pay $435 million for the property in the Midland basin, which is in the middle of the Permian. Some of the property is already producing oil and natural gas. One advantage to the new area is that a section is next to existing Pioneer acreage. That means the company can extend horizontal drilling, which is a more efficient way to extract gas and oil.
The company plans to use about 13,000 of the new acres to trade for more Midland Basin property, the news release said.
Pioneer figures on oil prices to go higher. Between that and the new acreage, it’s planning to increase its drilling rig count by five — to 17 rigs — by November of this year.
In a news release, Devon said that Wednesday’s announcement brings the total announced sale of non-core assets to $2.1 billion.
“At least two-thirds of our asset sales proceeds are expected to be used to further strengthen our investment-grade balance sheet, while one-third are targeted for reinvestment in our best-in-class U.S. resource plays,” said CEO and president Dave Hager.
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