I really like this deal for Pioneer Natural Resources (NYSE:PXD). Pioneer gets a deep-pocketed partner to fund the drilling costs and only had to give up 40%. Pioneer will continue as operator and will conduct all leasing, drilling, completion, operations and marketing activities in the joint interest area. 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.
Other players in the Permian Basin
The Permian Basin is quite active among the oil companies. The biggest player in the region is Occidental Petroleum Corporation (NYSE:OXY). Last year, Occidental Petroleum Corporation (NYSE:OXY) accounted for 16% of the oil produced in the Permian Basin, making the company the number-one producer in Texas. The company has 2.5 million net acres in the Permian Basin.
The exciting part about owning Occidental Petroleum Corporation (NYSE:OXY) is that the company is still undervalued. The stock is still trading below its all-time high of $115 from two years ago. The company has a great collection of assets and current CEO Steve Chazen has talked about restructuring the company to create shareholder value.
Besides its Permian Basin assets, Occidental has significant operations in California, South America, North Africa, and the Middle East. The company also has a chemicals business as well as midstream assets. There is a lot of value locked within the company. Hopefully, Chazen can unlock that value for shareholders and get the stock back toward the all-time highs.
Another significant player in the Permian Basin is Apache Corporation (NYSE:APA) with 1.6 million net acres. Apache now operates more than 12,000 wells in 152 fields. Last year, liquids production was up 25%. Apache cemented its position in the Permian Basin when it bought BP plc (ADR) (NYSE:BP)’s assets in the region in 2010.
Apache Corporation (NYSE:APA) is finally looking at ways to reward shareholders. For the longest time, Apache was focused on acquiring assets. Now the focus at Apache is divestitures and returning money to shareholders. The company just announced that it would sell $4 billion in assets to retire debt and repurchase 30 million shares. For shareholders, this is likely just the start of a full-scale restructuring of Apache Corporation (NYSE:APA)’s businesses. Management at Apache realizes that the stock has under-performed the oil and gas sector with a rise in the past year of only 1%. I see more value being unlocked in Apache shares going forward.
Foolish assessment
I think there’s a lot of potential in the Permian Basin for companies with prime acreage. Pioneer Natural Resources is one such company and I can see why the analysts are upgrading the stock. If the Wolfcamp Shale can deliver as projected, Pioneer Natural Resources can certainly justify a much higher share price.
Mark Yagalla has no position in any stocks mentioned. The Motley Fool owns shares of Apache. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Analysts Like Pioneer Natural Resources originally appeared on Fool.com is written by Mark Yagalla.
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