Exxon Mobil Secures Dominance in Permian Basin with $60B Acquisition
October 11, 2023
Exxon Acquires Pioneer Natural Resources
Following prior speculations, Exxon Mobil (XOM) has officially announced its acquisition of Pioneer Natural Resources (PXD) for just over $253 per share. This all-stock deal values the transaction around $60 billion. The move enables Exxon to broaden its footprint adjacent to its existing lands, consolidating its authority as a leading producer in the Permian Basin. Pioneer currently dominates as top operator in the Permian, commanding 9% of total production, while Exxon falls fifth at 6%.
Exxon’s Investment Strategy and Recent M&A Actions
This acquisition represents Exxon’s second major buyout in recent months, coming in the wake of their virtually $5 billion all-stock procurement of Denbury Resources (DEN) in July. Last year’s remarkable $56 billion profit has fortified Exxon’s liquidity, earmarking scores of billions for M&A actions. Despite mounting demands from shareholders and politicians endorsing a shift towards renewable energy, CEO Darren Woods stays resolute to a largely oil-dependent strategy. This latest deal is set to help Exxon effortlessly hit its Permian production goal of 1 million barrels daily.
The Financial Fallout and Sector Views
“This purchase of Pioneer could spell profit for Exxon Mobil courtesy of valuation disparities and potential synergies,” opines Jonathan Weber, lending financial insight on the transaction. Validating Weber’s standpoint, The Value Portfolio, an SA Investing Group Leader, calls the acquisition a ‘Crown Jewel’ for Exxon Mobil. Alternatively, Leo Nelissen suggests three other stocks as viable investments prompted by this deal.
Expected Impact on Future M&A in the Permian
The economies of scale ensued from Exxon’s merger with Pioneer could incite more M&A activity in the Permian Basin. ConocoPhillips (COP) is exploring possible deals across the shale sector. Earlier this year, Chevron (CVX) displayed interest in Occidental Petroleum (OXY), one of the largest producers in the Permian Basin but has since redirected its sights onto smaller targets. Following remarks about a potential deal with Pioneer, other Permian producers noted market growth last Friday — these include Permian Resources (PR) up by 4.8%, Diamondback Energy (FANG) experiencing a 4.2% surge and Coterra Energy (CTRA) along with Devon Energy (DVN) both seeing an uptick at 2.6% and 2% respectively.