Pioneer Natural Resources Co. on May 12 priced an upsized offering of convertible notes, which an RS Energy Group analyst says will “test the waters” for other oil producers considering a similar transaction.
“Pioneer is the first oil producer to announce this type of transaction,” Dane Gregoris, RS Energy Group director, wrote in a May 12 research note. “If it’s well received, we expect more will take advantage of the relatively robust capital markets post-crisis.”
Shale gas producers EQT Corp. and CNX Resources Corp. launched similar deals in early May, both of which were upsized, noted Gregoris.
In a company release, Pioneer said its offering of convertible senior notes due 2025 had been priced at an annual interest rate of 0.25%, or as analysts with Tudor, Pickering, Holt & Co. (TPH) put it: “near-zero.”
“Overall, while certain elements of the deal screen as complicated, we expect the market to be positive on the company’s ability to refinance in the current macro environment at such a low rate,” the TPH analysts wrote in a May 12 research note.
Pioneer’s offering of $1.15 billion notes had been upsized from $1 billion. The Irving, Texas-based company also granted an option for initial purchasers to buy up to an additional $172 million of notes.
Plans for proceeds include funding capped call transactions plus tender offers of up to $500 million of outstanding 2021, 2022 and 2028 notes as well as the repurchase of about $50 million in shares of the company’s common stock. Pioneer said any remaining proceeds will be used for general corporate purposes, which may include paying down debt.
Vinson & Elkins advised Pioneer in connection with the $1.15 billion notes offering and cash tender offers.
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