Exxon set to buy shale rival Pioneer for $60 billion in stock

Exxon Mobil (XOM.N) is expected to say on Wednesday it will buy US rival Pioneer Natural Resources (PXD.N) for about $60 billion, a deal that puts it atop the largest US oilfield and secures a decade of low-cost production, according to people familiar with the matter.

Exxon, which was valued at $442 billion on Tuesday, is expected to make a pure stock offer valued at more than $250 a share for Pioneer, the people said on condition of anonymity because the details were not public.

Pioneer shares closed at $237.41 on Tuesday, having risen 11 per cent since the first reports of a deal surfaced last Thursday.

It would be the largest acquisition by any company this year and Exxon’s biggest since its $81 billion purchase of Mobil Oil in 1998.

Exxon declined to comment on “market speculation,” while Pioneer did not immediately respond to a request for comment.

The deal will leave four of the largest US oil companies in control of much of the Permian Basin shale field and its extensive oilfield infrastructure.

Antitrust experts told Reuters last week that Exxon and Pioneer stood a good chance of completing their deal, even though they would face heavy scrutiny. This is because they could argue that together they will account for a small fraction of a vast global market for oil and gas.

The proposed deal comes after Exxon has pulled itself from deep losses and huge debts in the last two years by slashing costs, selling dozens of assets and benefiting from high energy prices spurred by Russia’s invasion of Ukraine.

Chief Executive Darren Woods has rebuffed investor and political pressure to shift strategies and embrace renewable energy as European oil majors have done. He faced heavy criticism for sticking to a heavy oil-dependent strategy as climate concerns became more pressing.

The decision paid off when the company last year earned a record $56 billion profit, two years after losses ballooned to $22 billion during the COVID-19 pandemic.

Exxon socked away some of the huge profits from the oil-price run up, putting aside some $30 billion in cash in anticipation of deals, according to analysts.

Pioneer has been one of the most successful oil companies to emerge from the shale revolution, which turned the US from a major oil importer into the world’s largest producer in little more than a decade.

It is the third-largest oil producer in the Permian basin, after Chevron Corp (CVX.N) and ConocoPhillips (COP.N), with rock-bottom production costs averaging about $10.50 per barrel of oil and gas.

Under CEO Scott Sheffield, the oil producer grew through rapid-fire purchases, including multi-billion dollar deals in 2021 for DoublePoint Energy and Parsley Energy.

Exxon’s planned purchase would outrank oil major Shell’s (SHEL.L) $53 billion acquisition of BG Group in 2016, which put it atop the global liquefied natural gas market.

Bloomberg News reported the deal’s price earlier on Tuesday.

In July, Exxon agreed to a $4.9 billion all-stock deal for Denbury Inc., a small US oil firm with a network of carbon dioxide pipelines and underground storage. That acquisition was intended to bolster Exxon’s nascent low-carbon business.

The largest US oil producer originally made an all-cash bid for Denbury, and at the last minute switched to all stock, reflecting both the target’s move up in market value during the talks and investors wanting to take part in any upside in Exxon’s stock.

The oil giant’s share price has recovered strongly since its early 2020 tumble to about $30 as oil and gas prices collapsed. Exxon shares recently hit an all-time high of $120 per share.