Pioneer shares increase in response to mega-merger discussions with Exxon. Pioneer Natural Resources (PXD.N) shares rose by nearly 8% on Friday following reports that Exxon Mobil (XOM.N), the largest oil and gas company in the United States, was in advanced negotiations to acquire the shale producer for a staggering $60 billion.
Exxon’s largest acquisition since its $81 billion purchase of Mobil in 1998 would be the subject of this transaction. As the United States approaches an all-time high of 13 million barrels of oil per day, the Permian basin, the largest shale oil field in the country, would become a prominent producer region for the company.
On Friday, Pioneer’s shares were valued at $235.25 per share, or approximately $55 billion. The offer implies a roughly 9 percent premium to Pioneer’s Thursday close.
The stock’s gains on Friday fell short of the transaction value due to the potential failure of the two companies to achieve a consensus.
“Still strikes us as slightly low for a company with the unique scale and quality of inventory held by Pioneer,” said Andrew Dittmar, a director at Enverus. The premium is comparable to that of other E&P mergers this year.
“It is a significant win for Exxon… an attractive price to acquire a unique Permian portfolio.”
Enverus estimates that Pioneer maintains approximately 6,300 net locations of high-quality inventory.
According to Enverus, the deal value indicates that Exxon is paying approximately $4.5 million for Pioneer’s high-quality locations and $3.7 million for all areas—more than recent M&A trends, which place asset values at roughly $3 million per location.
Reuters reported on Thursday, citing three sources, that an agreement between Exxon and Pioneer could be reached in the coming days if the negotiations are successful.
Nevertheless, any agreement might be subject to political and regulatory scrutiny.
“Pioneer is the largest operator in the Permian, accounting for 9% of gross production, followed by Exxon at 6%.” 15% of operational Permian production comprises this quantity, accounting for 6% of the overall US production. “In light of the FTC’s scrutiny of consolidation, these data points are pertinent,” RBC Capital Markets analyst Scott Hanold said in a note.
In July, the crude oil output from the United States surpassed 13 million barrels per day (bpd), marginally lower than the previous high established in November 2019.
In recent years, however, oil companies have reduced their expenditures on exploration in anticipation of the expansion of renewable energy.
According to industry specialists, the transaction may pave the way for additional large-scale M&A in the sector.
“This marks the inception of a significant industry consolidation,” stated Bill Smead, a chief investment officer of Smead Capital Management. This organization oversees funds totaling $5.2 billion, of which 25% are invested in oil and gas.