Continental Resources Enters Permian Basin in $3.25 Billion Expansion

After roughly a half-century operating as a leading U.S. oil and gas producer, Continental Resources Inc. is entering the country’s top shale basin. The Oklahoma City-based company struck an agreement with Pioneer Natural Resources Co. to acquire all of Pioneer’s assets in the Delaware Basin portion of the Permian in an all-cash transaction valued at approximately $3.25 billion.

Pioneer’s Delaware Basin position covers approximately 92,000 net acres with net production of approximately 50,000 boe/d, which will complement Continental’s existing deep inventory portfolio in the Bakken, Oklahoma and, most recently, the Powder River Basin.

According to Continental, the transaction includes over 650 gross operated locations in Third Bone Spring/Wolfcamp A and B, totaling more than 1,000 locations when including additional zones producing in the basin. Further, the company expects the acquisition to be accretive to cash flow per share, earnings per share, cash margin and return on capital employed with PDP representing roughly 75% of transaction price.

For Pioneer, the transaction marks the Irving, Texas-based company’s exit from the Delaware side of the Permian Basin. Pioneer expects to recognize a pretax loss of $900 million to $1.1 billion associated with the divestiture. Proceeds will be used to strengthen the Pioneer balance sheet.

The transaction is expected to close toward the end of the fourth quarter, subject to the satisfaction of customary closing conditions, including regulatory approval.

Citi Global Market Inc. is Continental’s financial adviser and White & Case LLP is the company’s legal adviser with respect to the transaction. Pioneer retained BofA Securities Inc. as a financial adviser and Vinson & Elkins LLP as legal advisor for the transaction.