Exxon nears a $60 billion deal to acquire Pioneer

Exxon Mobil is in advanced talks to buy Pioneer Natural Resources for around $60 billion.

Exxon is about to make its largest deal since the acquisition of Mobil in 1998. The deal would significantly improve its position in the Permian Basin, which is one of the most profitable regions in the US oil industry. Pioneer, which is the third-largest oil producer in the Permian basin, is valued at $50 billion as of 5 October 2023. The Permian basin is located in Texas and New Mexico and is the most sought-after region in the US energy sector due to its cost-effective oil and gas extraction. Chevron Corp. and ConocoPhillips are the only companies that rank ahead of Pioneer in the Permian basin. Exxon, on the other hand, has a market capitalization of $436 billion and is the leading oil producer in the US. Its daily output of 3.8 million barrels of oil equivalent (boed) from its worldwide operations highlights its dominance in the market. With a historic profit of $55.7 billion in the previous year, Exxon concluded the year with $29.6 billion in cash reserves, thanks to elevated oil and gas prices.

Due to declining energy prices in 2023, a chunk of those profits have been depleted. These prices had increased following Russia's invasion of Ukraine but have since receded amid apprehensions of a global economic deceleration impacting fuel demand.

The acquisition of Pioneer would provide Exxon with a portfolio of established oil-producing land, providing a dependable resource for production expansion when required.

Bill Smead, who serves as the Chief Investment Officer at Smead Capital Management, has deemed this deal completely logical.

During the second quarter, Exxon set a record production of 620,000 boed in the Permian basin. However, Pioneer's production in the same period was significantly higher, averaging 711,000 boed in the basin.

This news follows accusations made by the White House in February. Exxon allegedly earned substantial profits at the expense of consumers.

In a climate where drilling for new acreage poses substantial risks, several other major oil companies have turned to strategic acquisitions. Chevron

Corp. acquired shale producer PDC Energy Inc. for $7.6 billion in May.

It is worth noting that Pioneer too has acquired competitors in the U.S. shale industry, including DoublePoint Energy for $6.4 billion in 2021 and Parsley Energy for $7.6 billion in 2020. The company's headquarters are located in Dallas and are led by industry veteran Scott Sheffield, who has announced his retirement at the end of this year. He will be succeeded by the current Chief Operating Officer, Richard Dealy.