Many shale companies have been mired in losses because of weak crude prices, hovering around $40 a barrel since June. But unlike in past downturns, companies have struggled to raise new capital to restructure heavy debts.

The all-stock deal would create the largest Permian Basin-only focused shale producer and is expected to add annual cost savings of $325 million. Pioneer shareholders will own about 76% of the combined company.

Pioneer aims to increase cost savings and cash flow, positioning it as one of "a few investable independents," Chief Executive Scott Sheffield said on an analyst call on Tuesday.

"There's only going to be three or four survivors," Sheffield said, naming his own company, ConocoPhillips , EOG Resources Inc and "maybe" Hess Corp as likely winners that could lure investor interest.

The deal is part of "a historic winnowing" of U.S.-based oil firms, said Andrew Dittmar, senior M&A analyst at Enverus.

"Shale companies are looking for ways to regain their market footing," Dittmar said, adding: "Smaller companies don't want to be left out in the cold."

A combined company would pump about 328,000 barrels of oil per day. Neither company holds federal acreage, which is seen as riskier than state or private lands in case drilling rules change after the Nov. 3 U.S. presidential election.

One of Parsley's founders in 2008 was now-Chairman Bryan Sheffield, the son of Scott Sheffield. Both Pioneer and Parsley have criticized widespread natural gas flaring in the Permian oil field, saying wasting the natural gas and emitting greenhouse gas methane give the industry a black eye.

On Monday, ConocoPhillips agreed to buy U.S. shale oil producer Concho Resources Inc for $9.7 billion. That followed Chevron Corp's $4.2 billion purchase of Noble Energy, and Devon Energy Corp's $2.6 billion all-stock buy of rival WPX Energy Inc.

Such deals have increased pressure on oil and gas producers to buy up smaller rivals.

Parsley CEO Matt Gallagher will join Pioneer's board.

The deal is expected to close in the first quarter of 2021.

(Reporting by Jennifer Hiller in Houston and Arunima Kumar and Arundhati Sarkar in Bengaluru; Editing by David Gregorio and Peter Cooney)

By Jennifer Hiller