Sinochem enters Permian Basin shale via $1.7B agreement with Pioneer Natural Resources; 40% ownership plus funding for Pioneer
Sinochem Group signed a definitive agreement with Pioneer Natural Resources Company whereby Sinochem Petroleum USA LLC, a wholly-owned subsidiary of Sinochem Group, will purchase a 40% undivided interest in approximately 207,000 net oil and natural gas leasehold acres held by Pioneer in the southern Midland Basin Wolfcamp play, part of the larger Permian Basin.
Under the agreement, Sinochem will acquire approximately 82,800 net acres of leasehold with development rights for all Wolfcamp and deeper horizons. Consideration for the sale includes $500 million in cash at closing, subject to adjustment. In addition, Sinochem has agreed to fund 75% of Pioneer’s share of drilling and completion costs until an additional $1.2 billion has been funded. Closing of the transaction is expected in the second quarter of 2013 subject to customary governmental approvals.
The highly concentrated assets are located in the heart of the horizontal Wolfcamp Shale play within the Spraberry Trend in the Midland Basin. The Wolfcamp Shale provides predictable geology, underpinned by abundant well control from thousands of vertical penetrations. More than 400 industry horizontal Wolfcamp Shale wells have been spud to-date, and over 35 active horizontal rigs highlight the potential of multiple target zones within the Wolfcamp horizon. Pioneer, as operator, will conduct all leasing, drilling, completion, operations, and marketing activities within the joint interest area.
Tudor, Pickering, Holt & Co. Securities, Inc. and Mayer Brown LLP acted as financial advisor and legal adviser to Sinochem respectively on the transaction.
Pioneer Natural Resources Company is an independent oil and gas exploration and production company, headquartered in Dallas, Texas, with operations in the United States.