Quiver Quantitative - In a significant move for the energy sector, Exxon Mobil Corporation (NYSE:XOM) and Pioneer Natural Resources (NYSE:PXD) announced a merger through an all-stock transaction valued at $59.5 billion. This valuation places the price at $253 per Pioneer share, with the total enterprise value, inclusive of net debt, reaching approximately $64.5 billion. This strategic merger is expected to transform ExxonMobil's upstream portfolio by more than doubling its presence in the Permian region.
Combining Pioneer’s vast acreage with ExxonMobil's technological edge and financial strength, the merger promises high returns and efficiency, aiming to recover resources with a reduced environmental footprint. An environmentally progressive shift is also seen as ExxonMobil accelerates Pioneer’s net-zero Permian goal from 2050 to 2035. Furthermore, this merger is projected to elevate U.S. energy security by harnessing Exxon’s advanced technical and financial capabilities to optimize shale resources.
The combined assets of both companies, with Pioneer's over 850,000 acres and ExxonMobil's 570,000 acres in the Permian basins, will create an unprecedented inventory in the U.S. unconventional oil industry. Estimates suggest the presence of around 16 billion barrels of oil equivalent resource in the Permian. By 2027, ExxonMobil's Permian production is anticipated to reach approximately 2 million barrels of oil equivalent per day (MOEBD). This transaction also underscores Exxon's commitment to the U.S. oil industry, which is expected to persist in demand for many years.
The agreement between the two energy giants represents an 18% premium to Pioneer's share price before the public disclosure. Both company boards have unanimously approved this merger, which is slated to close in the first half of 2024 after navigating regulatory reviews and Pioneer shareholder approvals. This acquisition is Exxon's largest since its merger with Mobil in the 1990s and emphasizes its dominant role in the U.S. fracking industry, a position further solidified by this deal.
On the environmental front, ExxonMobil is ambitiously targeting net zero greenhouse gas emissions from its unconventional Permian operations by 2030. This commitment includes the adoption of cutting-edge methane monitoring technologies and an anticipated increase in recycled water use in Permian fracturing operations to over 90% by 2030. The acquisition of Pioneer, a significant player in the U.S. shale industry, will bolster Exxon's position and strategy in navigating the evolving energy landscape while balancing environmental responsibilities.
This article was originally published on Quiver Quantitative