In a surprising turn of events, Exxon Mobil (XOM.N) is reportedly gearing up to make a colossal $60 billion acquisition of U.S. rival Pioneer Natural Resources (PXD.N), a deal that’s set to send shockwaves through the energy sector.
Sources close to the matter, who spoke on the condition of anonymity, have revealed that Exxon plans to make an all-stock offer valued at more than $250 per share for Pioneer.
The implications of this deal are nothing short of game-changing, and it promises to secure a decade of low-cost production for Exxon.
The news has sent ripples through the financial markets, as Pioneer’s shares, which closed at $237.41 on Tuesday, surged by 2.7% to $244 in premarket trading.
Exxon’s Bold $60 Billion Acquisition Shakes Up the Oil Industry
Meanwhile, Exxon’s shares saw a slight dip. This acquisition, if it goes through, will not only be the largest of the year but also Exxon’s most significant move since its $81 billion acquisition of Mobil Oil in 1998.
Exxon’s decision to keep this under wraps has only fueled the speculation further, with the energy giant declining to comment on “market speculation,” and Pioneer staying tight-lipped as well.
However, industry experts believe this acquisition will significantly impact the landscape of the U.S. oil sector.
The most intriguing aspect of this deal is that it will consolidate the control of the Permian Basin shale field, one of the most prolific oil-producing regions in the United States, under four major players, including Chevron Corp (CVX.N) and ConocoPhillips (COP.N).
The sheer magnitude of this arrangement is bound to raise concerns about potential monopolistic practices, but antitrust experts believe that Exxon and Pioneer can make a compelling case for their merger, given the vast global market for oil and gas.
Exxon’s decision to go all-in on this acquisition signals a shift in strategy for a company that had been heavily criticized for not embracing renewable energy, unlike its European counterparts.
While Exxon stuck to its guns, focusing on oil and facing the heat from environmental concerns, it proved to be a wise decision as they rebounded from deep losses and massive debts.
Future of the Energy Industry
Last year, the company recorded an astounding $56 billion profit, just two years after suffering losses of $22 billion during the COVID-19 pandemic.
To make this acquisition possible, Exxon had reportedly socked away a whopping $30 billion in cash, setting the stage for strategic moves like this.
On the other side of the deal, Pioneer has been one of the standout companies from the shale revolution, capitalizing on the rapid transformation that turned the U.S. into the world’s largest oil producer in record time.
With rock-bottom production costs averaging about $10.50 per barrel of oil and gas, Pioneer, under the leadership of CEO Scott Sheffield, has been on an acquisition spree, including multi-billion dollar deals for DoublePoint Energy and Parsley Energy in 2021.
This deal is set to overshadow Shell’s $53 billion acquisition of BG Group in 2016, which established it as a dominant force in the global liquefied natural gas market.
Exxon’s expansion strategy is not solely focused on oil; in July, they agreed to a $4.9 billion all-stock deal for Denbury Inc., a small U.S. oil firm with a network of carbon dioxide pipelines and underground storage, a move intended to bolster Exxon’s nascent low-carbon business.
Exxon’s share price has also staged a remarkable recovery since its early 2020 slump to about $30, reaching an all-time high of $120 per share. This, along with the acquisition of Pioneer, is poised to reshape the energy industry landscape in the coming years.
The big question now is whether this acquisition will receive the green light and what it means for the future of oil and energy in the United States.
Will this deal solidify Exxon’s dominance, or will it face challenges on the road ahead? One thing is for sure: the energy sector is in for some unprecedented changes, and the ripples from this acquisition will be felt far and wide.