ExxonMobil, the largest U.S. oil company, has agreed to buy Pioneer Natural Resources, one of the leading shale producers in the Permian Basin, for about $60 billion in cash and stock, according to a report by the Wall Street Journal1.
The deal, which could be announced as soon as this week, would be ExxonMobil’s biggest acquisition since its merger with Mobil in 19981. It would also create a dominant player in the country’s most prolific oil and gas region, where both companies have extensive operations.
About Pioneer Natural Resources
Pioneer Natural Resources has a market value of more than $50 billion and produces about 600,000 barrels of oil equivalent per day, mostly from the Midland sub-basin of the Permian Basin. ExxonMobil has a market value of about $250 billion and produces about 3.8 million barrels of oil equivalent per day, with a significant presence in both the Midland and Delaware sub-basins of the Permian Basin.
The deal would be a strategic move for ExxonMobil, which has faced pressure from investors and activists to improve its financial performance and reduce its carbon footprint. The company has been investing heavily in the Permian Basin, aiming to boost its output to more than 1 million barrels per day by 2024. However, its U.S. production volumes have declined for the past four quarters, as it cut spending and rigs amid the COVID-19 pandemic and low oil prices.
Exxon-Pioneer deal potential outcomes
By acquiring Pioneer Natural Resources, ExxonMobil would gain access to one of the most attractive asset bases in the Permian Basin, with low-cost production, long-term growth potential, and strong environmental, social and governance (ESG) practices. Pioneer Natural Resources has been praised for its efforts to reduce flaring, methane emissions, and water usage in its operations. It has also set a target to achieve net-zero greenhouse gas emissions by 2050.
The deal would also be a culmination of a long-standing relationship between the two companies. ExxonMobil and Pioneer Natural Resources have been partners in several joint ventures in the Permian Basin since 2014. They have also been rumored to be in merger talks for several years, but no deal materialized until now.
The deal would be subject to regulatory approvals and shareholder votes from both companies. It would also face competition from other oil majors and private equity firms that are looking to consolidate their positions in the Permian Basin. The region has seen a wave of mergers and acquisitions in recent years, as companies seek to gain scale and efficiency amid volatile market conditions.
Some of the notable deals in the Permian Basin include Chevron’s $13 billion acquisition of Noble Energy in 2020, ConocoPhillips’ $9.7 billion acquisition of Concho Resources in 2020, Occidental Petroleum’s $38 billion acquisition of Anadarko Petroleum in 2019, and BP’s $10.5 billion acquisition of BHP’s shale assets in 2018.