After buying Pioneer's pumping assets, ProPetro No. 1 in Permian

By ProPetro Holding Corp. | November 13, 2018

ProPetro Holding Corp. has announced that it has entered into an agreement with affiliates of Pioneer Natural Resources Company by which ProPetro will become a strategic long-term service provider to Pioneer providing pressure pumping and related services for a term of up to 10 years. Under the agreement, ProPetro will acquire Pioneer’s pressure pumping assets in exchange for total consideration of $400 million comprised of $110 million of cash and 16.6 million shares of ProPetro common stock, representing approximately 17 percent Pioneer ownership in ProPetro following issuance. The transaction is expected to close during the fourth quarter of 2018, subject to the satisfaction of customary closing conditions, including regulatory approval.

Dale Redman, ProPetro co-founder and CEO, stated, “We could not be more excited about the opportunity to expand our relationship with Pioneer through this transformational transaction. The combination of ProPetro and Pioneer Pumping Services will result in the largest and most efficient pressure pumping provider in the Permian Basin. Equally as important is our strategic long-term service agreement, and we look forward to continuing our close partnership with Pioneer as they further develop their world class acreage here in the Permian Basin.”

“We are proud to welcome our new teammates from Pioneer Pumping Services as the combination with ProPetro will create an unmatched workforce in the industry. Finally, we want to thank our people, our customers, our supply chain partners, and the Permian Basin community for their continued long-term support of the Company and our efforts.”

Timothy L. Dove, Pioneer President and CEO, stated, “We are very pleased to announce our agreement with ProPetro that provides Pioneer with dedicated capacity from the leading pressure pumping service provider in the Permian Basin. Their robust operational track record aligns with our commitment to being the most efficient, low-cost Permian operator. We have had a strong relationship with the ProPetro team for many years, and this contract solidifies their position as a key partner in our development program. The long-term nature of this agreement will benefit both companies.

“I would also like to personally thank all of the dedicated employees of Pioneer Pumping Services. Their unrelenting commitment to safety, efficiency and execution has underpinned our success in the Permian Basin and we are excited to have them continue working on Pioneer locations for years to come in our partnership with ProPetro.”

PPS assets include eight frack fleets with 510,000 hydraulic horsepower, as well as three coiled tubing units and associated equipment. Upon closing of the transaction, ProPetro will have 28 frack fleets with 1,415,000 HHP operating in the Permian Basin. In addition, PPS assets include a best-in-class maintenance facility situated on 111 contiguous acres located near ProPetro’s current maintenance operations in Midland. As a result, the combination will increase ProPetro’s scale in the Permian Basin and expand its leading operational track record while allowing Pioneer to improve capital efficiency and long-term cost competitiveness in its core operations.

The total transaction value of $400 million is comprised of $333 million for the pressure pumping assets and $67 million for real estate facilities and other assets. The total transaction will be funded through a combination of $290 million of ProPetro shares issued to Pioneer and $110 million in cash. The 16.6 million shares issued by ProPetro are valued at $17.48 per share (based on a 20-day volume weighted average price as of market close on November 9, 2018). ProPetro will pay $55 million of the cash portion of the purchase price to Pioneer at closing, with the balance to be paid within the following sixty days. ProPetro plans to use a combination of its current revolving credit facility and its current cash balance to fund the cash portion.