Exxon Mobil is buying Pioneer Natural Resources in an all-stock deal valued at 59.5 billion US dollars (£48bn), its largest buyout since acquiring Mobil two decades ago, and creating a colossal fracking operator in West Texas.
Including debt, Exxon is committing about 64.5 billion US dollars (£52bn) to the acquisition, leaving no doubt as to the Texas energy company’s commitment to fossil fuels as energy prices surge.
Pioneer shareholders will receive 2.3234 shares in Exxon Mobil for each Pioneer share they own.
Exxon purchased XTO Energy in 2009 for approximately 36 billion dollars (£29bn). In the late 1990s, the merger between Exxon and Mobil totalled more than 80 billion (£65bn).
The deal with Pioneer Natural gives Exxon Mobil more access to the Permian basin, which runs through parts of Texas and New Mexico.
Drilling the Permian accounted for 18% of all US natural gas production last year, according to the US Energy Information Administration.
Pioneer’s more than 850,000 net acres in the Midland Basin will be combined with Exxon’s 570,000 net acres in the Delaware and Midland Basin, nearly contiguous fields that will allow the combined company to trim costs.
That is a big driver of the deal.
Natural gas rigs in operation have declined over 26% in the US since the start of the year, according to government data, largely due to the rising costs for drilling materials and labour over the past two years.
“Their tier-one acreage is highly contiguous, allowing for greater opportunities to deploy our technologies, delivering operating and capital efficiency as well as significantly increasing production,” Exxon Mobil chief executive Darren Woods said of Pioneer in a prepared statement.
The company will have an estimated 16 billion barrels of oil equivalent in the Permian.
Once the deal closes, Exxon Permian production volume will more than double to 1.3 million barrels of oil equivalent per day, based on 2023 volumes. It is expected to climb to about two million barrels of oil equivalent per day in 2027.
“The combination of ExxonMobil and Pioneer creates a diversified energy company with the largest footprint of high-return wells in the Permian Basin,” Pioneer chief executive Scott Sheffield said in a prepared statement.
Exxon has been flush with cash. The company posted record annual profits in 2022, bringing in 55.7 billion dollars (£45bn) in annual profits, exceeding its previous record of 45.22 billion (£37bn) in 2008.
Exxon has been using some of that cash on acquisitions. In July the company announced that it was buying pipeline operator Denbury in an all-share deal valued at 4.9 billion dollars (£4bn).
Pioneer Natural has been making similar moves. In 2020 the company said it was buying Parsley Energy in an all-share deal valued at approximately 4.5 billion dollars (£3.7bn). It then purchased DoublePoint Energy in a cash-and-stock deal worth about 6.4 billion dollars (£5.2bn) in 2021.
Both companies’ boards have approved the transaction, which is expected to close in the first half of next year. It still needs approval from Pioneer shareholders.
