Mesa to Buy Texas Oil Firm for $1.9 Billion

Mesa Inc. agreed to buy Parker & Parsley Petroleum Co. for $1.9 billion in stock and assumed debt, adding oil reserves to its natural gas holdings in a bid to recapture its lost prominence in the U.S. energy industry.

The $40.25-a-share agreement, 38% more than Parker & Parsley’s closing price Friday, would form one of the largest exploration and production companies in the U.S. Mesa would assume about $500 million of Parker & Parsley debt.

Mesa’s planned purchase of a company with a market value four times its own recalls former Chairman T. Boone Pickens’ practice in the 1980s of using Mesa to pursue hostile takeover bids for larger rivals. Pickens gave up control last year when Mesa sold a stake to financier Richard Rainwater to refinance its $1 billion of debt taken on during that period.

“It’s an opportunity to move forward with a bigger machine,” Pickens, who remains a Mesa director, said of the Parker & Parsley purchase.

The acquisition could mark the start of a consolidation wave among mid-size oil and gas producers, analysts said, because petroleum prices have declined this year.

“We’re going to see more consolidation because operating margins have narrowed with the lower prices,” said John Selser, an analyst with Howard, Weil, Labouisse, Fredrichs Inc. in New Orleans.

Mesa’s acquisitions, and the debt amassed to pay for them, left it a shadow of the company it was a decade earlier. Since then, Mesa has attempted to bolster its reserves and improve its access to capital.

The combined company, to be called Pioneer Natural Resources Co., would have 3.7 trillion cubic feet of reserves of natural gas equivalent. The reserves include Mesa’s prized holdings in the Hugoton gas field of western Kansas, considered the richest in the world.