Pioneer Natural Resources Company
(
PXD
) wrapped up the acquisition pact with Belgium-based Carmeuse
Holding SA to acquire the latter's U.S. industrial sands business -
Carmeuse Industrial Sands ("CIS") - for approximately $297 million.
The agreement was announced earlier last month.
The CIS unit - now known as Premier Silica LLC ("Premier
Silica") - is considered to be the leading producer of Hickory frac
sand, known as Brady Brown, which is being applied as proppant for
fracture stimulating oil and gas wells in the U.S. Hence, this move
will ultimately aid Pioneer in accelerating its drilling program
around three of its four core Texas growth assets - the Spraberry
vertical, horizontal Wolfcamp Shale and Barnett Shale Combo plays
-by securing premium, low-cost and logistically privileged brown
sand supply. The sand mine of the unit in Brady, Texas has a proven
brown sand reserve life of 30 years.
Other significant assets of the Premier Silica include two
channels (Bakersfield, California and Colorado Springs, Colorado)
for other grades of sand, two sand mines in Ohio (Glass Rock and
Millwood) that manufacture oilfield and industrial sands, one sand
mine in California, Orange County that generates construction and
recreational sand, and an oilfield cement material processing plant
in Riverside, California.
Headquartered in Dallas, Texas, Pioneer has set a target to
increase production at a compounded annual growth rate of more than
20% through 2014. This is mainly based on the pick up of activity
at its three core liquids-rich growth assets in Texas - namely,
Spraberry field, Eagle Ford Shale and the Barnett Shale Combo -
along with significant cost control initiatives. Again, on the
basis of the drilling plans, the company expects to deliver
production growth of 23% to 27% this year.
However, we think that these factors are adequately reflected in
the present valuation, leaving little room for meaningful upside
from current levels. We expect Pioneer, which competes with
EOG Resources, Inc.
(
EOG
) and
Newfield Exploration Company Co.
(
NFX
), to perform in line with the broader market, as corroborated by
our Neutral recommendation.
EOG RES INC (
EOG
): Free Stock Analysis Report
NEWFIELD EXPL (
NFX
): Free Stock Analysis Report
PIONEER NAT RES (
PXD
): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment
Research