Exxon Mobil Reportedly In Talks To Buy Shale Driller Pioneer Natural
by Shahnawaz Alam Business 06 October 2023
Exxon Mobil Corp. is reportedly in negotiations to acquire Pioneer Natural Resources Co., a shale-focused company, as reported by an anonymous source familiar with the matter. The Wall Street Journal initially broke this news, with the potential deal estimated to be valued at up to $60 billion. If all goes smoothly, the transaction could be finalized in the coming days, as stated in the Journal report.
Should this deal proceed at such a significant scale, it would rank as one of the largest deals of the year, eclipsing Pfizer Inc.’s $43 billion purchase of cancer drug maker Seagen Inc. earlier in March. This acquisition would also mark Exxon’s most substantial since its merger with Mobil Corp. in 1999 and position the energy giant as the leading producer in the prolific US oil basin.
Pioneer Natural Resources Co. closed its shares at $214.96 each, which gave the company an approximate valuation of $50.1 billion on the day the news surfaced.
Nonetheless, it’s worth noting that while the deal is advanced, it remains susceptible to complications and could potentially fall apart, according to the anonymous source. When contacted by Bloomberg for comments, both Exxon and Pioneer adhered to their policy of not addressing “market rumors.”
This prospective agreement would bring together two major players in the Permian Basin of Texas and New Mexico, significantly boosting Exxon’s position as the foremost oil producer in the region, with an expected daily output of around 1.2 million barrels, surpassing the production of many OPEC nations.
Moreover, it would substantially extend Exxon’s inventory of valuable drilling locations in the Permian Basin, securing a cost-effective and low-risk crude supply well into the year 2050, which can be utilized to support its extensive refinery network on the Gulf Coast.
The spotlight has been on Pioneer’s future since its founder and Chief Executive Officer, Scott Sheffield, announced his plan to retire by the end of the year in April. Sheffield is celebrated as one of the architects behind the shale boom that transformed the United States into an oil powerhouse and has been active in the Permian Basin since the 1970s.
Exxon has been actively seeking acquisition opportunities in the Permian Basin for some time but has faced challenges related to timing. The company’s finances took a hit during the pandemic due to plummeting oil prices and significant capital spending on global projects. To continue paying shareholder dividends, Exxon was forced to borrow billions of dollars.
However, after taking measures to reduce spending, cut costs, and reap the rewards of investments made during the pandemic, Exxon experienced a surge in profits, reaching a record-breaking $59 billion in 2022.
The company’s stock also saw significant growth, increasing by more than 80% in the previous year, providing the financial means for a potential transformative deal like the one with Pioneer.
Exxon’s CEO, Darren Woods, emphasized to investors in July the company’s commitment to reviewing potential mergers and acquisitions, with a focus on creating value while being selective in its choices.