U.S. shale oil production market is experiencing exponential growth and is rapidly marching towards becoming the largest oil producer across the world. Thus, various oil and natural gas firms are increasingly working towards growing their presence in the region, owing to which the oil sector is witnessing various collaborations and acquisitions lately.
One such acquisition was recently observed when, Parsley Energy, a renowned American shale oil producer headquartered in Austin, Texas, reportedly announced the acquisition of Jagged Peak Energy, an oil and natural company based in Denver, Colorado, for a total amount of $1.62 billion through an all-stock transaction.
The deal is predicted to close during the first quarter of next year. The deal has been approved by board of directors of both the companies. The all-stock deal is intended to be a tax-free transaction for the shareholders of Jagged Peak.
After the transaction closure, Parsley shareholders would own approximately 77 percent of the merged company, while Jagged Peak shareholders would own approximately 23 percent of the merged entity, both the cases would be on an entirely diluted basis.
Report cite, Parsley-Jagged Peak agreement was overall positive, however shares of Parsley would be pressured due to the present investor angst against agreements and worries about the timing of free cash flow of the company among other reasons.
This acquisition further provides Parsley access to oil and natural gas reserves of Jagged Peak situated in southern Delaware Basin, which comes under the Permian shale region.
Parsley stated that after the deal, it would approximately have 267,000 net acres of land in the Permian. Permian region has emerged as the largest United States oil production region as well as second largest for natural gas.
Matt Gallagher, Chief Executive Officer of Parsley Energy stated that Jagged Peak’s high-margin, oily asset base slots in nicely with the company’s returns-oriented development approach, its water infrastructure and acreage footprint merges into Parsley’s legacy Delaware Basin position.
Chief Executive Officer and President at Jagged Peak, Jim Kleckner stated that the combined assets of both the companies are a great fit that together create a Permian company that is stronger.
The total transaction is valued at $2.27 billion, including the net debt of $625 million of Jagged Peak as on June 30.