Exxon Mobil, the largest US oil company, has agreed to buy Pioneer Natural Resources, one of the leading shale producers in the Permian Basin, for $60 billion in cash and stock. The deal, which is expected to close in the first quarter of 2024, would create a powerhouse in the US oil industry and boost Exxon’s output and reserves in the most prolific oil field in the country.
A Strategic Move for Exxon Mobil
The acquisition of Pioneer would be the biggest deal for Exxon Mobil since its merger with Mobil Corp in 1999. It would also be the largest transaction in the US oil sector since Chevron bought Anadarko Petroleum for $33 billion in 2019.
Exxon Mobil has been under pressure from investors and activists to improve its financial performance and reduce its carbon footprint. The company has faced criticism for its heavy spending on new projects and its lack of exposure to renewable energy sources. In February, Exxon Mobil announced a new strategy to cut costs, increase cash flow, and invest in low-carbon technologies.
By buying Pioneer, Exxon Mobil would gain access to one of the most efficient and profitable shale operators in the Permian Basin. Pioneer has a market value of about $50 billion and produces about 600,000 barrels of oil equivalent per day. The company has also been praised for its environmental and social practices, such as reducing flaring, recycling water, and supporting local communities.
The deal would also allow Exxon Mobil to expand its portfolio of low-cost and low-carbon assets. According to Exxon Mobil’s CEO Darren Woods, the combined company would have a breakeven price of less than $35 per barrel and a carbon intensity of less than 10 kilograms per barrel of oil equivalent. Woods said that the acquisition would create “significant value” for both companies’ shareholders and “accelerate our transition to a lower-carbon future”.
A Win-Win Situation for Pioneer Natural Resources
For Pioneer Natural Resources, the deal would offer a premium price and a diversified partner. Pioneer’s shareholders would receive 0.4518 shares of Exxon Mobil and $25 in cash for each share of Pioneer they own. Based on Exxon Mobil’s closing price on Monday, the offer values Pioneer at about $240 per share, a 12% premium over its closing price on Monday.
Pioneer’s CEO Scott Sheffield, who announced his retirement earlier this year, said that the deal was “a testament to the hard work and dedication” of Pioneer’s employees and “a validation of our leadership position in the Permian Basin”. Sheffield added that he was “proud to join forces” with Exxon Mobil and that he was “confident that this combination will create long-term value for all stakeholders”.
The deal would also give Pioneer’s shareholders a stake in one of the world’s largest energy companies, with operations in more than 50 countries and a market capitalization of over $400 billion. Exxon Mobil has a diversified portfolio of upstream, downstream, and chemical businesses, as well as a growing presence in renewable energy sources such as biofuels, hydrogen, and carbon capture.
A Potential Game-Changer for the US Oil Industry
The deal between Exxon Mobil and Pioneer Natural Resources could have significant implications for the US oil industry and the global energy market. The US is currently the world’s largest oil producer, thanks to the shale revolution that started in the early 2000s. However, the shale sector has faced challenges in recent years due to low oil prices, high debt levels, environmental concerns, and competition from other regions.
The deal could trigger a wave of consolidation in the US oil sector, as smaller players struggle to compete with larger ones. It could also increase the bargaining power of US oil companies vis-à-vis other producers such as OPEC and Russia. Moreover, it could enhance the resilience and sustainability of US oil production amid rising demand and climate change pressures.
The deal is subject to regulatory approvals and customary closing conditions. It has been unanimously approved by both companies’ boards of directors and is expected to close in the first quarter of 2024.
