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Pioneer Natural Resources Company
(“Pioneer” or “the Company”)
today announced that the Company has signed an agreement with Sinochem
Petroleum USA LLC, a U.S. subsidiary of the Sinochem Group (“Sinochem”), to
sell 40% of Pioneer's interest in approximately 207,000 net acres leased by
the Company (“joint interest area”) in the highly prospective horizontal
Wolfcamp Shale play in the southern portion of the Spraberry Trend Area Field
for a total price of $1.7 billion. At closing, Sinochem will pay $500 million
in cash to Pioneer, before normal closing adjustments, and will pay the
remaining $1.2 billion by carrying a portion of Pioneer's share of future
drilling and facilities costs (“drilling carry”).
The transaction is expected to close during the second quarter of 2013,
subject to customary governmental approvals. Under the agreement, Sinochem
will acquire approximately 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 will continue as operator and will conduct all
leasing, drilling, completion, operations and marketing activities in the
joint interest area. The joint interest area covers defined 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 own drilling obligations for the horizontal
Wolfcamp Shale, Sinochem has agreed to fund 75% of Pioneer's portion of
drilling and facilities costs after closing until the $1.2 billion of drilling
carry is fully utilized. Pioneer has six years to utilize the drilling carry,
subject to extension under certain circumstances. At closing, Sinochem will
pay its 40% share of net expenditures in the joint interest area from the
December 1, 2012 effective date of the transaction to the closing date.
Pioneer and Sinochem have agreed to a development plan which forecasts the
drilling of 86 horizontal Wolfcamp Shale wells during 2013, increasing to 120
wells in 2014 and 165 wells in 2015.
To the extent Sinochem elects to participate in any vertical wells that are
drilled in the joint interest area after the effective date, Sinochem will
receive its share of production and costs from the Wolfcamp and deeper
horizons based on the anticipated reserve contribution from the Wolfcamp and
deeper intervals relative to anticipated reserves from all completed
intervals. Pioneer's and Sinochem's participation in vertical wells will be
based on each party's interest without any drilling carry being applied.
Pioneer will retain 100% of its existing vertical production in the joint
interest area.
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