Parsley Energy Inc.'s agreed-upon $2.27 billion merger with Jagged Peak Energy Inc. is drawing reactions from across the spectrum from industry analysts, with some strongly supporting the move and others wondering what motivated Parsley to undertake such a transaction.

During Parsley's conference call announcing the planned acquisition, CEO Matt Gallagher talked up the benefits of the merger in an attempt to assuage investors' concerns.

"This large asset base will assist our free cash flow profile and … a large portion of that will be going back to our shareholders," Gallagher said. "We will be deploying our projects to increase and enhance our free cash flow through 2020 and beyond."

Shareholders were in no mood to listen, sending Parsley's shares down approximately 11% on Oct. 14. In his commentary, Raymond James analyst John Freeman said the planned merger was likely a move to keep the company off the radar screens of potential buyers, as — like Jagged Peak — it had been suggested as a possible takeout target. Freeman added that the announcement had the effect of "negating much of the positive sentiment earned by management this year through consistent operational execution and capital prudence." He also said, however, that the deal should be beneficial for the company.

"We feel the deal is positive for Parsley in the long-term, particularly given the low deal premium relative to others in recent memory," Freeman said. "All-in, Parsley adds ~78K net acres and ~29 Mbbl/d of current oil production through Jagged Peak's high oil-cut assets in Ward County, Texas. Perhaps most importantly, we think the combination fits well with Parsley's focus on free cash flow in 2020 and beyond."

The Raymond James analyst said initial projections of 2020 production from an expanded Parsley show a 12% increase in oil production from guidance midpoints to between 126,000 barrels per day and 134,000 bbl/d. With a capital program between $1.6 billion and $1.9 billion, Freeman said, the company could deliver more than $300 million in free cash flow.

In his comments on the proposed deal, Mizuho's Paul Sankey hit at Parsley's leadership for a "zag when a zig [putting the company on the market] was hoped for" and for a perceived lack of excitement by the company's executives during their conference call.

"Management delivered the message as if it was the death of a family pet," Sankey said. "This gives rise to the suspicion that they knew their stock was going to get schlacked, and it duly was."

Sankey noted that Parsley's stock gave up its gains for the year in a single day after the announcement, that Jagged Peak shares also slid on word of the merger and that oil prices are likely not going to help make management's case for the deal.

"Parsley stock's reaction was so bad that the deal became a take-under, with Jagged Peak trading below its Friday close over the day," he said. "We also wonder why the timing now, right before winter, and just before oil typically hits its February lows."

In spite of those concerns, Sankey found the addition of highly contiguous acreage in Delaware Basin to be a long-term positive for Parsley.

"We had upgraded thinking there was upside to consensus 2020 oil production & following PE's shift to a cash return growth focus that would, longer-term, be more attractive to a broader investor base," he said. "None of that changes with the deal, and the underperformance yesterday more than accounts for perceived operational risk on the acquired assets heading into 2020."