Pioneer Natural Resources CompanyPXD announced that it, together with Reliance Industries Limited, has closed the sale of their Eagle Ford Shale Midstream business as was declared earlier. The business has been divested to an affiliate of Enterprise Products Partners L.P. EPD for $2.15 billion. The deal is subject to normal closing adjustments.
The Eagle Ford Shale Midstream business was jointly held by Pioneer and Reliance with 50.1% and 49.9%, respectively. Per the terms of the agreement, the Pioneer and Reliance joint development will commit its Eagle Ford shale acreage to Enterprise Products Partners for two decades under a fixed-fee gathering agreement.
Pioneer and Reliance will also gain from the decrease in fee under the current contracts with Enterprise Products Partners for downstream processing and transportation. The reduced fees are likely to benefit Pioneer and Reliance over the original terms of the downstream contracts by about $200 million on a net present value basis at 10%. These reduced fees will mainly be shown as improvements in future realized prices. Enterprise Products Partners has also decided to expend $270 million on new facilities, connections and expansions over the next decade to support the on-going development of the Eagle Ford Shale resource.
The acquisition cost will be paid in two installments by Enterprise Products Partners. The first installment of $1.15 billion will be paid at the closure of the deal, while the final installment of $1.0 billion will be paid within a year of the closing date.
On closure of the deal, Pioneer's share of the net sale proceeds will be about $530 million after retiring the debt of Eagle Ford Shale Midstream of about $125 million. A year later, the company will be entitled to another $500 million. Pioneer will also receive a pretax gain of over $725 million from the sale of Eagle Ford Shale Midstream, which will be realized in the third quarter of 2015. Pioneer expects a total net proceed of about $930 million after tax from the sale.
Pioneer currently holds a Zacks Rank #2 (Buy). Other favorably-priced stocks from the same space are Transmontaigne Partners L.P. TLP and LRR Energy, L.P. LRE . All these stocks sport a Zacks Rank #1 (Strong Buy).