Exxon buys rival Pioneer shale oil company for $59.5 billion in stock

NEW YORK/HOUSTON (Reuters) – ExxonMobil (XOM.N) said on Wednesday it would buy U.S. rival Pioneer Natural Resources (PXD.N) in an all-stock deal worth $59.5 billion that would put it at the top of the world’s largest company. An American oil field that provides a decade of low-cost production.

Exxon offered $253 per share for Pioneer. Pioneer shares, which closed at $237.41 on Tuesday, rose 1.1% to $239.98 in premarket trading. Exxon shares were flat.

This deal will be Exxon’s largest since its $81 billion purchase of Mobil Oil in 1998 and the largest acquisition this year.

The deal value includes a premium of 6.57% according to Pioneer’s last close, according to Reuters calculations.

The deal would leave four of the largest U.S. oil companies in control of much of the Permian Basin shale field and extensive oil field infrastructure.

Pioneer is the largest operator in the Permian and accounts for 9% of total production, while Exxon is fifth at 6%, according to RBC Capital Markets analysts.

Antitrust experts told Reuters last week that Exxon and Pioneer have a good chance of completing their deal, although they will face intense scrutiny. This is because they would claim that together they would make up a small part of the huge global market for oil and gas.

The deal comes after Exxon extricated itself from huge losses and huge debts in the past two years by cutting costs, selling dozens of assets and taking advantage of high energy prices resulting from the Russian invasion of Ukraine.

CEO Darren Woods rejected pressure from investors and politicians to change strategies and embrace renewable energy, as major European oil companies have done. He has faced intense criticism for his commitment to a heavy oil strategy as climate concerns become more pressing.

The decision paid off when the company last year achieved record profits of $56 billion, two years after losses swelled to $22 billion during the Covid-19 pandemic.

Exxon has written off some of the huge profits from higher oil prices and set aside about $30 billion in cash in anticipation of the deals, according to analysts.

Pioneer was one of the most successful oil companies to emerge from the shale revolution, which transformed the United States from a major oil importer into the world’s largest producer in just over a decade.

The Permian Basin is highly regarded in the US energy industry for its relatively low cost of extracting oil and gas, with production costs at rock bottom averaging about $10.50 per barrel.

Under CEO Scott Sheffield, Pioneer has grown through rapid acquisitions, including multibillion-dollar deals in 2021 for DoublePoint Energy and Parsley Energy.

Exxon’s purchase would surpass oil major Shell’s $53 billion acquisition of BG Group in 2016, putting it at the top of the global liquefied natural gas market.

In July, Exxon agreed to a $4.9 billion deal to buy all shares of Denbury, a small US oil company that owns a network of carbon dioxide pipelines and underground storage. The aim of this acquisition was to strengthen Exxon’s emerging low-carbon business.

The largest U.S. oil producer originally made an all-cash bid for Denbury, and at the last minute switched to all shares, reflecting the target’s rise in market value during the talks and investors’ desire to participate in any rally in Exxon’s shares.

The oil giant’s stock price has rebounded strongly since falling in early 2020 to around $30 as oil and gas prices collapsed. Exxon shares recently reached an all-time high of $120 per share.

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