June 10, 2024

Central News

at the center of it

ExxonMobil buys rival Pioneer for $60bn as global energy market quakes

EXXONMOBIL has agreed to buy U.S. rival Pioneer Natural Resources in an all-stock deal valued at $59.5 billion that would make it the biggest producer in the largest U.S. oilfield and secure a decade of low-cost production.
Many analysts may not have added up the statistics to recon that America is currently the world’s largest oil producer.
The deal, valued at $253 a share, combines the largest U.S. oil company with one of the most successful names to emerge from the shale revolution that turned the country into the world’s largest oil producer in little more than a decade.
The offer represents a 9% premium to Pioneer’s average price for the 30 days prior to Oct. 5, when reports of deal talks surfaced. Pioneer shares were up 2% at $241.79 in pre-market trading. Exxon shares fell 2.5%.
This deal, which is expected to close in early 2024, will leave four of the largest U.S. oil companies in control of much of the Permian Basin shale field and its extensive infrastructure.
Still, anti-trust experts told Reuters last week that Exxon and Pioneer stood a good chance of completing their deal, even though they would 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, Reuters says.
Combination creates largest wells
“An FTC review is quite possible but the market share of this combination appears to be under thresholds typically warranting action,” RBC Capital Markets analyst Scott Hanold says in a note.
Pioneer is Permian’s largest operator accounting for 9% of gross production, while Exxon occupies the No. 5 spot with 6%, according to RBC Capital Markets analysts.
“The combination of ExxonMobil and Pioneer creates a diversified energy company with the largest footprint of high-return wells in the Permian Basin,” says Pioneer CEO Scott Sheffield in an encounter with Reuters.
Pioneer had bulked up through multibillion-dollar deals such as those of shale rivals DoublePoint Energy for $6.4 billion in 2021 and Parsley Energy for $7.6 billion in 2020 under founder-CEO Sheffield.
For Sheffield, an industry veteran who has said he would retire at the end of the year, the sale could be his swan song.
Permian is highly valued by the U.S. energy industry because of its relatively low cost to extract oil and gas, with rock-bottom production costs averaging about $10.50 per barrel.
It is Exxon’s biggest since its $81 billion purchase of Mobil Oil in 1998, years before the shale boom began. It would also outrank oil major Shell’s $53 billion acquisition of BG Group in 2016, which put it atop the global liquefied natural gas market.