Between Noble Energy Inc. (NYSE: NBL) and Pioneer Natural Resources Co. (NYSE: PXD), the two E&Ps command $45 billion in market value, giving their disposition toward A&D activity slightly more significance.

Like many large caps, concepts such as bolt-on acquisitions and bidding up deals are on a different scale that the majority of oil and gas E&Ps. In September, for instance, EOG Resources (NYSE: EOG) chairman and CEO William R. “Bill Thomas” called the company’s $2.5 billion purchase of Yates Petroleum Corp. a “really big bolt-on.”

In their third-quarter earnings, Noble and Pioneer talked future A&D in the Permian Basin—or explicitly refused to—and outlined plans to slough off expendable acreage. Both companies pulled the trigger on large third-quarter deals, which will likely lead to more activity.

David L. Stover, Noble’s chairman, president and CEO, preemptively shut the door on addressing market rumors that the company is contemplating a Permian bolt-on during a Nov. 2 conference call.

“Let me be clear,” Stover said, “we feel no urgency, nor have any desire to bid up prices in the basin. And as always, we will be patient and selective in evaluating any additions to our position in the heart of the Delaware Play.”

The company did report on the dissolution of its Marcellus joint venture (JV) and the remnants of noncore acreage from its Rosetta Resources deal.

Pioneer management talked up its A&D plans, partly helping to get the word out that it intends to sell thousands of Permian acres. The company wants to reduce its inventory following a Midland Basin deal valued at $435 million.

“We think when we do a transaction like the Devon transaction, we should also carve some assets off the bottom of our portfolio,” said Timothy L. Dove, president and COO of Pioneer, during a Nov. 2 conference call.

Dove is set to become the company’s CEO at the end of December.

Cruising Altitude

Pioneer is working to sell three Permian acreage packages, with one underway, since its purchase of Devon Energy Corp.’s (NYSE: DVN) 28,000 Midland acres which closed in August. The company plans to divest a similar amount of acreage into 2017.

The company is already in “full gait” to sell 7,000 net acres in Andrews County in West Texas, Dove said. Pioneer has reached the data room stage for moving the asset.

Dove said Pioneer will also shop roughly 20,000 acres in northeast Martin County, Texas, either this year or in 2017. “It's possible we'd have one smaller package in addition,” he added.

With Permian assets selling for big money, a transaction could “prove to be a very lucrative deal for PXD,” said Irene Haas, an analyst at Wunderlich Securities Inc.

Besides clearing noncore inventory, the transactions will help offset money spent for the Devon deal, Dove said.

“Our whole objective here is to be able to say that a transaction like Devon is net-net, when all the smoke clears,” he said.

RELATED: Devon’s Secondhand ‘Noncore’ Midland Wares Go For $860 Million

In general, Pioneer’s philosophy is to look at the company daily and consider everything potentially up for sale.

“I think it's certainly the case that some of these assets are areas where [capital is not being spent],” Dove said. However, the company is not looking to move any of its other assets for now.

But Pioneer is unlikely to engage in larger-scale transactions.

An uptick in commodity prices would greatly improve the profitability of the company’s Eagle Ford and Midcontinent holdings.

A&D All Over Again

Noble struck on two A&D fronts in the third quarter.

In the Eagle Ford, Noble said Nov. 1 it closed the sale of about 11,000 noncore acres in the Eagle Ford for $68 million at the end of the third quarter. The buyer was undisclosed.

In the sale, Noble offloaded small positions in La Salle, Atascosa, Live Oak and Dimmit counties in South Texas where the company had not engaged in drilling activity since the Rosetta merger that closed in 2015.

Noble Energy, Consol Energy, Marcellus, joint venture, JV, separation, map, Pennsylvania, West Virginia, shale

Noble’s merger with Rosetta added two new core plays to the company’s portfolio in the Eagle Ford and Permian Basin. The transformative acquisition included 50,000 net acres in the Eagle Ford and 56,000 net Permian acres. The all-stock deal was valued at $3.9 billion.

The company will now focus on increased drilling activity.

To the East, Noble also entered an agreement with Consol Energy Inc. (NYSE: CNX) to break up their Marcellus JV covering about 669,000 acres in Pennsylvania and West Virginia.

As part of the separation, Noble will pay $205 million to Consol to eliminate its remaining carry cost obligations and gain 100% working interest in 363,000 acres primarily in West Virginia. Additionally, the company will secure large potential in the Utica shale play of West Virginia’s Northern Panhandle.

Ops Report

Noble and Pioneer reported generally strong quarters and hinted at ramping up in 2017.

For the third quarter, Noble reported earnings exceeding analyst estimates driven largely by lower costs, Tom Driscoll, managing director of Barclays Research, said in a Nov. 2 report.

The company plans to accelerate onshore drilling and increased its capex guidance for the fourth quarter by $75 million to a midpoint of $450 million. Noble’s third-quarter capex was between $400 million and $450 million.

However, Noble is maintaining its production guidance for the fourth-quarter between 400- and 401 thousand barrels of oil equivalent per day (Mboe/d), which reflects 7 Mboe/d of divestiture volumes.

Noble will allocate 70% of its spending to its U.S. onshore assets in the Delaware and Denver-Julesburg basins and the Eagle Ford. The remaining capital will primarily be directed to its Tamar Platform in the Eastern Mediterranean.

Pioneer Natural Resources, Spraberry, Wolfcamp, shale, acreage position, 2016, horizontal drilling, map

Pioneer’s results showed strong third-quarter production that beat Wall Street predictions by 2%—somewhat dampened by EBITDA of $536 million that fell short of expectations.

In the Spraberry and Wolfcamp, Pioneer is increasing its rig count to 17 rigs from 12 through the end of the year, with production expected to come online in 2017.

Pioneer also said it shipped its first two oil export cargoes to Europe in the third quarter. The company shipped 610,000 barrels of oil and has another shipment moving the week of Nov. 7.

For now, export profits are based on transport differentials and not crude quality, the company said.

Pioneer is guarded on its view of 2017 oil prices and is not expecting OPEC’s agreement to stick.

Scott Sheffield, CEO of Pioneer, said that even if OPEC comes to terms “everyone will cheat. I’ve seen this over my 42-year-career.”

Sheffield doesn’t expect the market to balance until 2018.

“PXD, with tons of cash on its balance sheet and good hedges in place, will be able to keep growing regardless OPEC’s course of action,” Haas said.

Pioneer has an estimated $2.3 billion in cash.

Darren Barbee can be reached at dbarbee@hartenergy.com, and Emily Moser can be reached at emoser@hartenergy.com.

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