Exxon in talks to buy Pioneer in what could be 2023’s biggest deal

BLOOMBERG

Exxon Mobil Corp is in talks to acquire Pioneer Natural Resources Co, according to a person familiar with the matter, nearing its largest takeover in more than two decades as the energy giant seeks to become the dominant US producer of shale oil.
An agreement could be worth as much as $60 billion and may be completed in the coming days provided there are no complications, according to the Wall Street Journal, which first reported the talks. At that size, it would potentially be the world’s largest takeover this year.
The deal could also be Exxon’s biggest acquisition since merging with Mobil Corp in 1999, marking its unquestionable return to the top of the US oil and gas industry after more than a decade in which upstart shale drillers set the agenda and drove growth.
Though advanced, the transaction could still fall apart, the person said. Responding to requests for comment from Bloomberg, both Exxon and Pioneer said they don’t comment on “market rumors.”
A deal with Pioneer would unite two of the biggest acreage holders in the Permian Basin of Texas and New Mexico, making Exxon far and away the formation’s dominant oil producer with an output of about 1.2 million barrels a day — more than many Opec nations. It would also extend Exxon’s inventory of top-tier drilling locations in the basin by decades, providing low-cost, low-risk crude well beyond 2050 to feed its giant refinery network on the Gulf Coast.
“The logic of consolidation in the highly fragmented Permian shale remains compelling, with significant gains to be achieved from economies of scale,” Citigroup analysts including Alastair Syme said in a note. “This particular combination would create the largest Permian player and, even with a modest deal premium, we estimate can generate a positive return on investment.”

Shale Architect
Attention has been focused on the future of Pioneer since founder and Chief Executive Officer Scott Sheffield said in April he planned to retire at year’s end. Sheffield has worked in the Permian since the 1970s and is credited as an architect of the shale boom that made the US an oil powerhouse.
Sheffield’s more than 20 collective years at the helm of Pioneer is one of the longest ongoing public CEO tenures in the US oil industry. He cut his teeth in the Permian basin more than 40 years ago, continuing to work there through the dark decades when supermajors including Exxon abandoned the basin to search for crude overseas. By the time drilling and fracking innovations developed in natural gas fields were adapted to oil deposits around 2010, Pioneer was well-placed to become one of the fastest-growing producers.
Exxon has been on the lookout for acquisitions in the Permian for years but has struggled with timing. The company’s finances took a hit during the pandemic as oil prices plunged and as it ramped up capital spending on large global projects, forcing Exxon to borrow billions of dollars to pay shareholder dividends.
After pulling back on spending, cutting costs and reaping the benefits of pandemic-era investments, Exxon’s profits surged to a record $59 billion in 2022 as energy prices jumped following Russia’s invasion of Ukraine. Its stock gained more than 80% last year, providing the financial firepower for a potentially era-defining deal with Pioneer.
Exxon’s CEO Darren Woods told investors in July the company continued to review potential M&A, but would remain “picky” and focused on creating value.