Exxon Mobil
is close to announcing a deal to buy
Pioneer Natural Resources,
according to a report, a move that would mark the largest oil merger in years and set Exxon up as the dominant producer in the Permian Basin region.
A $60 billion deal could be announced in the next few days, The Wall Street Journal said, citing people familiar with the matter. At that price, the deal would be Exxon’s biggest since its merger with Mobil in 1999. It would also be bigger than
Occidental Petroleum’s
(ticker: OXY) purchase of Anadarko in 2019 for $38 billion, the most recent megadeal in the oil industry.
Assuming the deal goes through near the price reported in the Journal story, analysts consider it a relatively inexpensive purchase for Exxon, which made nearly $60 billion in 2022 alone. The $60 billion price values Pioneer at 5.4 times its expected 2024 Ebitda, or earnings before interest, taxes, depreciation, and amortization—a discount to Exxon’s own current valuation of 6.5 times, according to Enverus analyst Andrew Dittmar.
Dittmar wrote that the price “strikes us as slightly low for a company with the unique scale and quality of inventory held by Pioneer.”
The report came out before the market opened Friday. Once trading started, Exxon stock (XOM) slipped 2.8% to $105.45. Pioneer (PXD) rose 9.7% to $235.86.
Both companies declined to comment.
Acquiring Pioneer would make Exxon the dominant player in the U.S. Permian Basin in Texas and New Mexico. Pioneer’s acreage in the Midland Basin, the eastern part of the Permian, has some of the largest untapped fields left in the U.S.
It is no coincidence the timing of this potential deal comes as oil prices have started to perk up again, after mostly falling this year.
Global energy markets have revived recently as oil prices picked up over the past few months—at least before dropping this week. On Friday, Russia lifted a ban on diesel exports. Separately,
Shell
(SHEL) announced that natural gas trading increased in the past quarter over the previous one.
Last year’s oil price spike in the wake of Russia’s invasion of Ukraine led to record profits for Exxon and the rest of Big Oil. The Organization of the Petroleum Exporting Countries and Russia have announced reductions in output to keep prices from falling back too much now.
It might also be the start of a string of other smaller explorers getting snapped up.
Permian Resources
(PR) stock was up 3% Friday.
Diamondback Energy
(FANG) rose 1.9%.
“We would not be surprised to see further consolidation in the upstream space given the limited inventory and relatively inexpensive price of most” exploration and production companies, said analysts led by Neal Dingmann at
Truist.
With energy prices higher, Exxon now has the capacity to explore and produce fuel within the U.S., avoiding geopolitical tensions. The Pioneer deal also shows Exxon shareholders that the company is still focused on fossil fuels, even though it has also gotten into the lithium business and low-carbon initiatives.
Write to Brian Swint at [email protected] and Avi Salzman at [email protected]
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