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Permian-Focused Solaris Issues ‘Landmark’ SustainabilityBonds for Produced Water Infrastructure . . . . . . . . . . . . . . . . . . . . . . . 2Tuesday, April 6, 2021 - Vol. 11, No. 126Pioneer Natural Building Permian MidlandStronghold with 6.4B DoublePoint DealDallas-based Pioneer Natural Resources Co., whosefocus has long been in the Permian Basin Midland, isplunking down 6.4 billion to build its base with the takeover of West Texas competitor DoublePoint Energy LLC.The deal, a cash-and-stock split, would add 97,000net contiguous acres directly offsetting and overlappingPioneer’s existing footprint. The mostly undrilled acreagewould increase Pioneer’s Midland sub-basin leasehold toone million-plus acres with “no exposure to federal lands.”DoublePoint’s footprint in the Midland would “complement our unmatched position in the core of the PermianBasin,” Pioneer CEO Scott Sheffield said.Fort Worth, TX-based DoublePoint was cont' pg. 2REGULATORYAlberta Working to Expand NaturalGas-Fired Petrochemical Projectswith Inter Pipeline GrantThe Alberta government on Monday awarded aC 408 million ( 326 million) grant to Inter Pipeline Ltd.for new industrial projects that use natural gas and itsliquid byproducts as raw materials.Inter Pipeline is receiving the grant through the Alberta Petrochemicals Incentive Program (APIP) in threeannual installments after the scheduled completion ofits C 3.9 billion ( 3.1 billion) Heartland PetrochemicalComplex near Edmonton in early 2022.The plant would consume 22,000 b/d of propane tomake 525,000 tons/year of polypropylene, an intermediate mainstay for manufacturing a wide array of cont' pg. 5Trade Date: Apr 05; Flow Date(s): Apr 06Basin/RegionGulf CoastBarnettEagle FordHaynesville - E. TXHaynesville - N. LAPermian1Tuscaloosa Marine ShaleMidcontinentArkoma - WoodfordCana - WoodfordFayettevilleGranite Wash*NortheastMarcellus - NE PA2Marcellus - NE PA: Other3Marcellus - NE PA: Tenn4Marcellus - SW PA/WVUtica5Rocky Mountains / WestBakkenGreen River Basin*Niobrara-DJ6Piceance Basin*Uinta Basin*San Juan 294379392298-15656181942Notes: Table represents fixed-price delivered-to pipeline transactions in USD/MMBtu. These data arecomprised of deals that NGI believe represent trading activity in the respective resource plays and maycontain gas that was produced from conventional formations. * Denotes a tight sands formation. Volumesmay not total due to rounding. For more information, please see NGI’s Shale Price Methodology.E&P NEWSU.S. E&Ps Reining in Capex, while International Operators Spending MoreU.S. oil and gas producers are likely to reduce theircapital spending this year by around 8% as they remain“extremely disciplined, yes, really,” based on a globalsurvey by Raymond James & Associates Inc.Analysts Pavel Molchanov, John Freeman and Graham Price compiled the 2021 projections in the firm’sNATGASINTEL.COM eighth annual capital expenditure (capex) survey. The 50publicly traded global exploration and production (E&P)companies sampled provide context about the overallhealth of the industry and ultimately, the outlook formedium-term oil and gas supply.Capex plans have been on a roller coaster cont' pg. 6SHALE DAILY COPYRIGHT INTELLIGENCE PRESS 2021 FOR A FREE TRIAL VISIT NATGASINTEL.COM1
Tuesday, April 6, 2021’s SHALE DAILYTMPERMIAN BASINPermian-Focused Solaris Issues ‘Landmark’ SustainabilityBonds for Produced Water InfrastructurePermian Basin-focused Solaris Midstream HoldingsInc. said it has completed offering 400 million in seniorunsecured notes for the first sustainability linked bond(SLB) in the produced water infrastructure industry.T h e H o u st o n based operator, parent company to Solaris Water MidstreamLLC, said the noteswere a “landmark issuance.” SLBs, whichare used for generalcorporate purposes,underpin environmental, social and governance (ESG) performance indicators.These types of bondsmay enable issuers toscale up decarbonization efforts and attracta broader range ofinvestors interestedin ESG initiatives.The transactions “are transformative for Solaris Wateron multiple levels and recognize our sustainability effortsto date, positioning us to deliver significant value to ourcustomers, investors, shareholders and other stakeholders,” said Solaris Water CEO Bill Zartler. “We believe ourintegrated produced water handling and recycling assets,blue-chip customer base and differentiated approach tofull-cycle produced water management will continue todistinguish Solaris Water as oil and gas development inthe Permian Basin progresses.”Solaris Water, which has regional offices in the heartof the Permian in Carlsbad, NM, and Midland, TX, constructs and operates handling, recycling, groundwatersupply and water management solutions.“We have been a pioneer in developing recyclinginfrastructure in the Permian Basin, and this sustainabilitylinked feature of the notes recognizes Solaris Water’slong-term leadership in full-cycle produced water management,” said Solaris Water COO Amanda Brock.The notes mature in 2026 and pay an annual interestrate of 7.625%. Proceeds are to be used to repay debt andfor general corporate purposes. The transaction simplifiesthe capital structure and “adds liquidity and flexibility tosupport additional growth opportunities,” managementsaid.Pioneer Natural Building Permian Midland Stronghold with 6.4B DoublePoint DealContinued from Page 1formed in 2018 by two Lower 48 explorers, Double EagleEnergy Holdings III LLC and Denver-based FourPointEnergy with private equity commitments from ApolloGlobal Management Inc., Quantum Energy Partners,Magnetar Capital and GSO Capital Partners LP.“The combination of Pioneer and DoublePoint is compelling from both a financial and operational standpoint2NATGASINTEL.COM and a natural fit for DoublePoint,” said Apollo’s GeoffreyStrong, co-head of Infrastructure and Natural Resources.“This acquisition continues the trend of consolidation inthe prolific Permian Basin, combining two complementaryfootprints in a transaction with both top- and bottom-linesynergies.”DoublePoint co-CEOs Cody Campbell cont' pg. 3SHALE DAILY COPYRIGHT INTELLIGENCE PRESS 2021 FOR A FREE TRIAL VISIT NATGASINTEL.COM
Tuesday, April 6, 2021and John Sellers said they had long admired the Pioneermanagement team. “The fit and the synergies are clear,and we look forward to working with Pioneer to continuecreating value.”Pioneer last October took over Permian pure-playParsley Energy Inc. in a blockbuster 7.6 billion deal.That merger added Midland and Delaware sub-basin land.With the notable spending perhaps in mind, management noted that Pioneer’s pro forma leverage metricswould remain “relatively unchanged” to preserve “financial and operational flexibility.”To buy DoublePoint, Pioneer plans to issue 27.2 million common shares and provide 1 billion cash, giving’s SHALE DAILYTMexisting Pioneer shareholders 89% of the combination.The Pioneer board has unanimously approved the deal,which is set to be completed by the end of June.According to Pioneer, production from the DoublePoint assets is forecast to be hit 100,000 boe/d by midyear. By combining adjacent operations, the merger is expected to result in total annual cost savings of about 175million from operational efficiencies and cost reductions.DoublePoint is running seven rigs in the Midlandtoday, but by year’s end, Pioneer plans to knock it downto five rigs and reduce activity by about 30%. Once thetransaction is completed, estimated by mid-year, around 470-570 million in capital spending would be cont' pg. 4Effective April 15th, 2021, access to this content will be restricted to LNG Insight subscribers. Click here to learn more about LNG Insight.NATGASINTEL.COM SHALE DAILY COPYRIGHT INTELLIGENCE PRESS 2021 FOR A FREE TRIAL VISIT NATGASINTEL.COM3
Tuesday, April 6, 2021directed to the DoublePoint assets.Mixed ReactionReaction to the deal was negative early Monday, withPioneer’s share price off by 5.5%. Analysts with Tudor,Pickering, Holt & Co. (TPH) said they had expected asmuch. Analysts offered two reasons.“First, after Pioneer snatched Parsley up on thecheap through a merger of equals, we think the companyhad solidified its top spot in terms of Tier 1 inventory inthe Permian and could selectively bid at attractive valuations on future deals or simply pass versus paying fullprice,” analysts noted.“Second, we think buying a high proved developedproducing decline asset from a private equity-backedcompany pushing hyperbolic growth may not be well received by investors, as clients are looking for companiesto lower corporate declines — not raise them.”The DoublePoint acreage quality “looks to be on pargiven the location, although at first glance, the 160 wellsdrilled since 2017 are about 10-15% below our blendedcore Pioneer curves. But at this transaction price, absent’s SHALE DAILYTMa rally in crude, we think Pioneer essentially paid for thatupfront.”Raymond James & Associates Inc. analyst John Freeman also weighed in. “Given Pioneer’s top-tier contiguousMidland acreage position and leading inventory backlog,the acquisition was certainly a surprise. However, theglove-like nature of the acreage fit certainly drives longterm value accretion.”Analyst Nitin Kumar with Wells Fargo Equity Research said Monday the “resurgence of private shaleactivity has been a concern for many investors who seeit potentially overtaking the ‘restrained growth’ narrativefrom public operators adopting our Shale 3.0 mantra, ledby Pioneer “In the absence of free market controls over the activity of sponsored private shale players, Pioneer is trying todo its part to control the global oil price narrative whilestill focusing on free cash flow (FCF) accretion. Willshareholders reward its efforts, and will others follow?”Kumar asked.Kumar said investors may be concerned aboutwhether the DoublePoint transaction “means cont' pg. 5Source: Tallgrass Energy LP, NGI calculations. For more info and daily 10am ET updates of this chart, go to natgasintel.com/rextracker.4NATGASINTEL.COM SHALE DAILY COPYRIGHT INTELLIGENCE PRESS 2021 FOR A FREE TRIAL VISIT NATGASINTEL.COM
Tuesday, April 6, 2021another round of shale consolidation is coming. We thinkthe current backdrop differs notably” from last fall. “But,the need for scale in light of evolving regulations and’s SHALE DAILYTMinvestor demands could force more small/private operatorsto consider ‘tapping out.’”Alberta Working to Expand Natural Gas-Fired Petrochemical Projects with Inter Pipeline GrantContinued from Page 1synthetic end products from auto and television parts tomedical and sports hardware.Calgary-based Inter Pipeline predicted its complex,a first for Canada, would have 65% less greenhouse gasemissions than the global average for comparable sites asa result of a modern design that takes into account climatechange policies.NATGASINTEL.COM APIP covers 12% of construction costs.“Projects like this are exactly what the province needsto become a global center of excellence in the growingpetrochemical sector,” said Alberta Natural Gas MinisterDale Nally.Heartland plant construction is about three-quartersfinished. APIP replaced a previous, less generous Albertasubsidy that awarded projectsponsors credits against provincial gas royalties to give gasproducers in trade for supplycommitments.Only two other candidatesfor the new aid program havebeen publicly identified to date,and neither has advanced intoconstruction.A C 4.5 billion ( 3.6 billion) Alberta polypropylene project was shelved in December byCanada Kuwait PetrochemicalLtd., a partnership of PembinaPipeline Corp. and Petrochemical Industries Company KSC.Natural Gas Prices: [NGI’snatural gas price indexes haveincluded trade data from bothprice reporters and the Intercontinental Exchange (ICE) since2008]The partners set no newconstruction target date andblamed the indefinite suspensionon shaky economic conditionsdue to public health activity restrictions adopted to counter theCovid-19 pandemic.The other known candidatefor APIP aid remains in planningstages. The C 2 billion ( 1.6 billion) methanol plant proposal isby Nauticol Energy, a cont' pg. 6SHALE DAILY COPYRIGHT INTELLIGENCE PRESS 2021 FOR A FREE TRIAL VISIT NATGASINTEL.COM5
Tuesday, April 6, 2021private Calgary firm led by Alberta industry and financeveterans.APIP has no program cost limit. A regional municipalities alliance, titled Alberta’s Industrial Heartland,’s SHALE DAILYTMforecasts that up to C 30 billion( 24 billion) in new petrochemical investments are possible intheir region beside Edmonton by2030.“The program was designedto compete against similar programs offered by American stateslike Louisiana and Pennsylvania,which have seen significant investment in petrochemicals,” theAlberta government noted.Inter Pipeline presidentChristian Bayle described APIPas “a structured and logical approach” that makes the province“very competitive with other jurisdictions in North America andalso substantially enhances theeconomics for future petrochemical investments in Alberta.”U.S. E&Ps Reining in Capex, while International Operators Spending MoreContinued from Page 1for the past few years. This year appears to be no different, analysts said.“Aggregate capital spending for our global 50-company survey peaked in 2013 at 600 billion,” the Raymond James analysts noted. “This was followed by brutalausterity during 2014-2016, pushing spending down bymore than half to 280 billion. Modest recovery during2017-2019 brought spending back up to 341 billion.“And then, of course, came the nightmare of 2020.”Higher Spending OverallThe pandemic’s initial crisis last spring came earlyenough to give E&Ps the ability to swiftly slash capex.Total spending in 2020 came in at 249 billion, down27% year/year and 11% below the previous trough levelof 2016. U.S. spending plunged 42%, while internationalcapex dipped by one-quarter.“Based on the initial 2021 budget figures, which aresubject to future revision, of course, our survey indicatesthat 2021 global spending will tick up 5% to 262 billion,”Molchanov and his colleagues said.“This is still below the previous 2016 trough, and itequates to a cumulative drop of 56% from the peak level6NATGASINTEL.COM of 2013. To clarify, this 56% drop comprises a combination of lower activity levels, as well as lower industrywidecosts. The relative proportions of these two variablesnaturally differ from region to region and from companyto company.”For the U.S. portion of the survey, the RaymondJames team historically had conducted a top-down analysis based on prices, production and cost metrics. Theanalysis created a proxy for aggregate cash flow generation. The top-down review was relevant because of theU.S. industry’s fragmentation, which does not offer a clearway to track the budgets of hundreds of private E&Ps.Moreover, many multinationals have U.S. operations.[NGI’s natural gas price indexes have includedtrade data from both price reporters and the Intercontinental Exchange (ICE) since 2008. Find out more aboutour price index data here.]That said, the widespread production shut-ins in 2020related to the pandemic made it impossible to conduct atop-down or year/year comparison. Using the bottom-upapproach, data point to a U.S. capex decline of 8% from2020, down for the third consecutive year. cont' pg. 7SHALE DAILY COPYRIGHT INTELLIGENCE PRESS 2021 FOR A FREE TRIAL VISIT NATGASINTEL.COM
Tuesday, April 6, 2021“Here is what we find so fascinating,” said analysts.“Most U.S. E&P companies aim for lower spendingin 2021, even as international budgets are mostly up.Amazingly, this means that U.S. E&Ps are being moredisciplined in 2021 than their international counterparts.”U.S. E&Ps for decades have routinely outspent theiroverseas counterparts. The domestic operators throughouthistory “had been the fastest to cut spending but also thefastest to ramp back up as the oil market recovers.”How West Texas Intermediate (WTI) oil prices trendin the second half of this year could tell the tale on whetherthe U.S. E&Ps hold steady or go all in again. If WTI pricesremain at or above current levels into the second half of theyear, most E&Ps look to overspend their initial budgets.“However, even then it would not be realistic for2021 spending to get back to pre-Covid levels, given theheightened investor focus on free cash flow generation andcapital discipline,” the Raymond James analyst team said.“The longer this industrywide austerity drags on, themore bullish it will ultimately be for oil prices.”’s SHALE DAILYTMdiversified operators that have their fingersaround the world, including operations inthe United States.The variables differ from region toregion and operator to operator. There isless clarity on capex in countries where theE&Ps are dominated by state enterprises,especially those without public listings.The lack of clarity, especially true ofmembers of the Organization of the Petroleum Exporting Countries, “means that anyanalysis of global spending carries a limiteddegree of precision,” analysts noted.Of the 50 large E&Ps that disclosedfinancials, 17 were generally U.S.-focusedpure-plays that work in most of the major basins. Another18 ply their skills in a single country outside the UnitedStates, while 15 are considered diversified multinationals.“All in, we believe that our survey captures 45-50%of spending in the U.S. and 75-80% of spending outsidethe U.S., which brings the global weighted average to cont' pg. 865-70%.”It’s ComplicatedInternational E&Ps are set to increase capex byaround 6% this year over 2020 spend, the survey indicated.Pulling together the capex plans for operators outside theUnited States is complicated by tax structures and financialterms, “some of them cloaked in contractual secrecy.” Therelationship between cash flow and capex also is not asclear cut as it is in the United States.Raymond James separated the internationals into twogroups. The domestic E&Ps excluded any U.S. operations,while the second group was multinationals. The domesticsubset comprised E&Ps centered on one country, including, national oil companies. The multinationals includeNATGASINTEL.COM SHALE DAILY COPYRIGHT INTELLIGENCE PRESS 2021 FOR A FREE TRIAL VISIT NATGASINTEL.COM7
Tuesday, April 6, 2021’s SHALE DAILYTMRaymond James did not attempt to create pro formaestimates for companies involved in corporate buyoutsthat were announced in 2020.There was one notable omission from the survey.Saudi Arabia Oil Co., aka Aramco, is the world’s largestoil producer. It began disclosing financials in 2016, butnot enough historical data is available to include in thesurvey, which “relies on a full decade of data, going backto 2010,” analysts noted.“For what it’s worth, though, Aramco’s 2020 spending of 27 billion was down 19% year/year, and the 2021budget of 35 billion is up 30%. This makes Aramco oneof the few top-tier players to return to pre-Covid spendinglevels in 2021.”Shale Daily is published daily, each business day by Intelligence Press, Inc. (703) 318-8848.For breaking natural gas and shale news and more detailed pricing data, please visit us at: naturalgasintel.comFor a listing of all our premium newsletters and data services, please visit: naturalgasintel.com/premiumservicesNGI's Shale Daily Tuesday, April 6, 2021Vol. 11
Apr 06, 2021 · of the Permian in Carlsbad, NM, and Midland, TX, con-structs and operates handling, recycling, groundwater
