Exxon intends to buy competing shale oil company Pioneer for $60 billion in shares

NEW YORK/HOUSTON (Reuters) – ExxonMobil (XOM.N) is expected to say on Wednesday that it will buy U.S. rival Pioneer Natural Resources (PXD.N) for about $60 billion, a deal that puts it at the top of the world’s largest company. The US oil field 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 offering worth more than $250 a share for Pioneer, the people said on condition of anonymity because details were not public.

Pioneer shares closed at $237.41 on Tuesday, having risen 11% since first reports of the deal emerged last Thursday.

This would be the largest acquisition by any company this year and Exxon’s largest 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 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.

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 proposed 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.

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 has grown through rapid acquisitions, including multibillion-dollar deals in 2021 for DoublePoint Energy and Parsley Energy.

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

Bloomberg News reported the deal price earlier on Tuesday.

In July, Exxon agreed to a $4.9 billion deal to buy all shares of Denbury Inc, 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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