Thursday Oct 12 2023 11:15
4 min
Exxon Mobil has officially announced its acquisition of Pioneer Natural Resources, marking an all-stock deal valued at $59.5 billion, or $64.5 billion when including debt. The deal will mark the biggest oil merger in years, cementing Exxon as the dominant producer in the Permian Basin region of the U.S. and marking the company’s biggest acquisition since its merger with Mobil in 1999.
“Pioneer is a clear leader in the Permian with a unique asset base and people with deep industry knowledge,” said Exxon Mobil Chief Executive Darren Woods in a press release. “The combined capabilities of our two companies will provide long-term value creation well in excess of what either company is capable of doing on a standalone basis.”
Pioneer's stock saw a premarket rise of 1.5%, while Exxon's stock fell by 3.1%.
Under the terms of the agreement, Pioneer shareholders will receive 2.3234 Exxon shares for each Pioneer share they hold. At the closing prices on October 5th ($108.99 for Exxon and $214.96 for Pioneer), the deal places the value of Pioneer shares at $253.23 each, representing a 17.8% premium.
The Wall Street Journal had previously reported that a deal was near October 5th.
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Pioneer is the Permian Basin’s largest operator accounting for 9% of gross production, while Exxon occupies the No. 5 spot at 6%, according to an evaluation by RBC Capital Markets analysts cited by Reuters.
"The combination of ExxonMobil and Pioneer creates a diversified energy company with the largest footprint of high-return wells in the Permian Basin," commented Pioneer CEO Scott Sheffield.
This merger will unite Pioneer's 85,000 net acres in the Midland Basin with Exxon's 570,000 net acres in the Delaware and Midland Basins. Together, they will possess an estimated 16 billion barrels of oil equivalent in the Permian.
The Permian Basin holds significant appeal within the U.S. energy sector due to its cost-efficient oil and gas extraction, boasting remarkably low average production costs at close to $10.50 per barrel.
Exxon expects the merger to enhance its lower-cost-of-supply production and short-cycle capital flexibility. Pioneer's assets are anticipated to yield a cost of supply below $35 per barrel.
Antitrust experts told Reuters last week that Exxon and Pioneer stood a good chance of completing their deal — even though they would likely face heavy scrutiny. This is because they could argue that even as the largest Permian producer, together they will account for a small fraction of a vast global market for oil and gas.
Exxon stock has seen a robust resurgence following a sharp decline in early 2020, when oil and gas prices plummeted to around $30. An oil production cut extended by Russia and Saudi Arabia until the end of the year has kept the commodity elevated, with some analysts projecting a potential rise to $100.
Recent turmoil in the Middle East amid the Israel-Hamas war has spurred Brent and WTI prices higher on supply disruption risks, although investors’ concerns appear to have eased in trading on Wednesday.
Exxon shares recently hit a historic peak at $120 per share, having risen by 12.2% over the past year. In contrast, Pioneer shares have gone down by 3.5%.
At the time of writing, Exxon shares were priced around the $107 mark in premarket trading. In contrast, Pioneer shares traded around the $241 mark, as per MarketWatch and NYSE data.
When considering shares for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.
Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.
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