Pioneer pursues divestment of Eagle Ford midstream business

Pioneer Natural Resources Co.

Pioneer Natural Resources Co. (NYSE:PXD) is pursuing the divestment of its 50.1% share of the Eagle Ford Shale (EFS) Midstream business. Reliance Holding USA Inc. owns the remaining 49.9% of the EFS Midstream business and also plans to pursue the divestment of its share in a joint process with Pioneer, which is the operator of the business.

Chairman and CEO Scott D. Sheffield stated, “The sale of EFS Midstream would allow us to strategically redeploy capital to our core, oil-rich Spraberry/Wolfcamp assets in the Permian Basin of West Texas, where we are successfully transforming the substantial resource potential we delineated in 2013 into strong production growth. We currently have no plans to divest our Eagle Ford Shale upstream assets. The sale of EFS Midstream is not expected to impact our ability to export processed Eagle Ford condensate.”

The EFS Midstream business was formed in 2010 to construct facilities to provide gathering and handling services for condensate and natural gas produced from wells on dedicated acreage in the Eagle Ford shale play. These services are provided for the Eagle Ford Shale upstream joint venture operated by Pioneer (Pioneer 46%, Reliance 45%, and Newpek LLC 9%) and for various third parties. The EFS Midstream system consists of 10 central gathering plants and 460 miles of pipelines. The system gathers and separates produced condensate from produced gas. It also stabilizes the condensate, where necessary, and treats the gas. Pioneer’s cash flow from EFS Midstream is forecasted to be over $100 million in 2015.

"Given current attractive valuations for midstream assets and $100 million of projected cash flow from the asset (net) in '15, we believe a sale could be worth $1.2-$1.5 billion to the company. These proceeds, combined with $950-$1,150 million of net proceeds from an equity issuance announced concurrently with earnings (range reflects possible greenshoe exercise), implies $2.5 billion or more of capital could be raised by mid 2015 (pretax)," said Sterne Agee analyst Tim Rezvan in a note following the announcement.

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