Pioneer continued to show “they get it” when they acquired DoublePoint for a slightly eye popping $6.4B. With $0.9B of assumed debt and $1B in cash, the rest was with equity so 2/3 of the price is a “relative value” and “macro” play on oil prices, buying ~80 mboe/d (roughly $2B PDP) and 95,000 acres ($46k/acre, but DoublePoint had a lot of minerals so nets are likely high).

Not surprisingly, I like the deal a lot. All the rock in the U.S. worth owning is already owned and the Permian is the only oil play with significant drilling inventory, and is therefore, the only basin that matters. To “win” (unless you are John/Cody or Skye), you must ‘drill your returns’ with huge scale to maximize supply chain savings, lateral length and footprint efficiencies and manage the ever growing ESG pressure to virtue signal change while doing the things every responsible operator should be doing (no flaring and no fresh water in fracs).

There is no reason to exist if you are less than a $20B company. The capital markets are closed unless its for debt (and its expensive if you are small), the cost pressures are too high to compete with OPEC when API (pronounced Exxon) supports carbon taxes and sooner or later, U.S. companies are going to need to focus internationally again.

Next up: I expect a wave of acquisitions over the summer. My bets? Devon and Marathon; Ovintiv and SM; Oxy and PDCE; FANG and Callon; Matador and CDEV; and my dark horse but favorite: Exxon and EOG.

#hottakeoftheday