* To sell 40 percent of interest in Texas field
* Sinochem to pay $500 mln in cash, rest in future drilling
* Sinochem will acquire about 82,800 net acres of leasehold
* Pioneer shares rise 3 pct
By Swetha Gopinath
Jan 30 Oil and gas producer Pioneer Natural
Resources Co said it would sell a 40 percent stake in
about 207,000 net acres in the Wolfcamp shale field in Texas to
China's state-run Sinochem Group Co Ltd for $1.7
The deal is the latest in a string of investments by Chinese
companies in North America, which are seeking new energy sources
to power the country's booming economy and to gain understanding
of emerging drilling methods to tap shale reserves at home.
Shares of Pioneer, valued at about $14.50 billion, rose 3
percent to $121.32 in early morning trade on Wednesday.
Sinochem will pay $500 million in cash and spend $1.2
billion to fund a portion of Pioneer's future drilling costs.
Sinochem will acquire about 82,800 net acres of leasehold as
per the deal. Pioneer will continue as the operator of the joint
interest area, the Dallas-based company said.
Production in the joint interest area averaged about 2,000
barrels oil equivalent per day (boe/d) in 2012, with a year-end
exit rate of about 5,000 boe/d.
At least four analysts said the deal was a big win for
Pioneer, with valuations beating their expectations by a wide
"We believe the $18,100/acre price (given 5 mboepd
production at year-end 2012 at $100,000 per flowing boe) on the
Southern Midland Wolfcamp JV is about $3,000/acre above Street
expectations and is positive for the stock," Global Hunter
Securities analyst Mike Kelly wrote in a note.
Most analysts' expectations were between $10,000 and $15,000
The deal was also positive for nearby producers such as
Devon Energy Corp <DVN.N, EOG Resources Inc, Laredo
Petroleum Holdings Inc, Linn Energy LLC, Legacy
Reserves LP and Callon Petroleum Co, Robert W.
Baird analyst Michael Hall wrote in a note.
The emerging Wolfcamp Shale may ultimately rival the success
of Eagle Ford shale in the same state, information provider IHS
Inc said in December.
The deal is expected to close during the June quarter, with
December 1, 2012 being the effective date of the transaction.
Deals involving Chinese companies in North America include
Sinopec Corp's $2.2 billion investment in five
fields being developed by Devon Energy and CNOOC Ltd's
$15.1 billion deal for Canada's oil producer Nexen Inc.
Sinochem's businesses span energy, agriculture, chemicals,
real estate and financial services, and the company has 200
units including Sinochem International Corp,
Sinofert Holdings Ltd and Franshion Properties (China)
Pioneer and Sinochem plan to drill 86 horizontal wells this
year in Wolfcamp, increasing it to 120 in 2014 and 165 in 2015.
The deal also allows Pioneer to accelerate drilling in its
more prolific Northern Permian acreage by freeing up capital,
Robert W. Baird's Hall said.
This is Pioneer's second partnership with an overseas
company. Indian conglomerate Reliance Industries Ltd
bought a 45 percent stake in Pioneer's Eagle Ford assets for
$1.3 billion in 2010. The investment has helped Pioneer ramp up
drilling in the Texas oilfield.
Pioneer also said on Wednesday it discontinued efforts to
sell its properties in the Barnett shale in north Texas. The
fields had a carrying value $456.8 million as of Dec. 31, 2011.
BofA Merrill Lynch was financial adviser to Pioneer, while
Vinson & Elkins LLP was the legal adviser.