The Exxon Mobil logo and stock chart are seen through a magnifying glass in this illustration taken on September 4, 2022. REUTERS/Dado Ruvic/Illustration/File Photo Obtaining licensing rights
Oct 6 (Reuters) – Shares of Pioneer Natural Resources (PXD.N) rose nearly 11% on Friday on news that Exxon Mobil (XOM.N), the largest U.S. oil and gas company, is in advanced talks to buy the shale oil producer. In a deal worth $60 billion.
The deal will be Exxon’s largest acquisition since its acquisition of Mobil in 1998 for $81 billion. It will make the company one of the major producers in the lucrative Permian Basin, the largest shale oil field in the United States as the country’s oil production approaches full production. A time record of 13 million barrels per day.
Pioneer shares were trading at $238.50 on Friday, valuing the company at about $56 billion. The offer includes a roughly 20% premium to Pioneer’s Thursday close. Exxon shares fell 1.6%.
Friday’s gains left the stock short of supply, as the two companies likely won’t reach an agreement.
The premium is in line with other exploration and production mergers this year, but “still seems a little low for a company with the unique size and quality of stock held by Pioneer,” said Andrew Dittmar, a director at Enviros.
“It’s a big win for Exxon…and it’s an attractive price to acquire this unique Permian portfolio.”
Pioneer has an estimated 6,300 net locations of high-quality inventory, according to Enverus.
The value of the deal means Exxon is paying about $4.5 million for the high-quality Pioneer sites and $3.7 million for all sites, exceeding recent merger and acquisition trends that valued the assets at about $3 million per site, Enviros said.
If negotiations are concluded successfully, an agreement could be reached between Exxon and Pioneer in the coming days, Reuters reported on Thursday, citing three sources.
However, any deal could attract political and regulatory scrutiny.
“Pioneer is the largest operator in the Permian Basin with 9% of total production while Exxon is No. 5 with 6%. They total 15% of Permian Basin operated production, but only 6% of total US production. Points This data is relevant given the Federal Trade Commission’s scrutiny over “consolidation,” Scott Hannold, an RBC Capital Markets analyst, said in a note.
U.S. crude oil production rose to nearly 13 million barrels per day in July, just shy of the record high set in November 2019.
However, oil companies have reduced their spending on exploration in the past few years due to expectations of growth in renewable energy.
Industry experts said the deal could set a precedent for more large-scale mergers and acquisitions in the sector.
“This is the beginning of massive consolidation in the industry,” said Bill Smid, chief investment officer at Smid Capital Management, which manages $5.2 billion in funds, a quarter of which is in oil and gas.
(Reporting by Mrinalika Roy, Surasis Bose and Arunima Kumar in Bengaluru and Sabrina Valli in Houston – Prepared by Mohammed for the Arabic Bulletin) Editing by Sriraj Kalluvila
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