Parsley Energy (PE) Wraps Up Acquisition Of Jagged Peak
Zacks Investment Research | Jan 12, 2020 10:24PM ET
Parsley Energy,Inc. (NYSE:PE) recently announced the completion of its acquisition of smaller rival Jagged Peak Energy in a deal worth $1.8 billion.
This strategic move provides Jagged Peak Energy stockholders with 0.447 shares of Parsley Energy Class A common stock for each share held.
Rationale Behind the Deal
Per Parsley Energy, this “low premium” deal will leave an immediate positive impact on its 2020 cash flow along with net asset value and returns on invested capital. Additionally, the Permian pure play will be able to curb general and administrative costs by almost $25 million in the first year followed by $40-$50 million annual savings subsequently.
This all-stock deal will help the combined entity maintain a strong balance sheet with a pro forma net leverage ratio of 1.6x LTM adjusted earnings before interest, income taxes, depreciation, depletion, amortization and exploration expense.
Parsley Energy’s assets reportedly complement Jagged Peak’s high-margin, oil-heavy assets in the Delaware Basin. The companies’ integration is expected to make a significant contiguous impression on the Delaware Basin, resulting in more optimized lease geometry with additional extended lateral walls. Of the sprawling 267,000 Permian Basin net acres that Parsley Energy will hold, 147,000 net acres will be in the Midland Basin and the remaining 120,000 in the Delaware Basin.
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