ExxonMobil sealed a megadeal to acquire shale producer Pioneer Natural Resources for about $60 billion on Wednesday, and depicted the transaction as boosting US energy security in an attempt to allay regulatory concerns.
The US oil giant said the takeover, the company’s biggest since the late 1990s acquisition of Mobil by Exxon, will enable greater economies of scale in the Permian Basin — a fast-growing petroleum region in the southwestern US — permitting it to deploy drilling and operating technologies over a bigger region and enabling cheaper oil production.
“The combined capabilities of our two companies will provide long-term value creation well in excess of what either company is capable of doing on a standalone basis,” said ExxonMobil Chief Executive Darren Woods.
Under the all-stock transaction, ExxonMobil will buy Texas-based Pioneer for $59.5 billion based on ExxonMobil’s closing price on October 5. The overall transaction, including debt, is valued at around $64.5 billion, the companies said.
The transaction prices Pioneer at $253 per share, up about 18 percent prior to a Wall Street Journal article last week reporting the talks.
Shares of Pioneer rose Wednesday, but lagged below the deal price — a gap that analysts said likely reflects uncertainty about the transaction’s completion due to regulatory issues.
Company officials emphasized significant investment plans that would enable Exxon to more than double its current volumes from the region to two million barrels of oil equivalent per day in 2027.
“ExxonMobil believes the transaction represents an opportunity for even greater US energy security by bringing the best technologies, operational excellence and financial capability to an important source of domestic supply, benefitting the American economy and its consumers,” the company said in a press release.
But “whether law makers and regulators at the Federal Trade Commission and Department of Justice agree with that assertion remains to be seen,” said a note from Briefing.com, which predicted the deal would face intense antitrust scrutiny from regulators.
Dan Pickering, chief investment officer at Houston investment firm Pickering Energy Partners, predicted the deal would go through. He said US antitrust regulators have traditionally focused on questions of the downstream operations and gasoline production, which is not a factor in the deal.
“There will be a lot of squawking,” Pickering told AFP, adding that “there is no rational ground to block this transaction.”
Climate change?
Production in the Permian Basin, located in western Texas and eastern New Mexico, accounts for a whopping 5.8 million barrels of oil per day, or about 45 percent of US output.
The region has a long and storied history, with the first wells dating to 1920. The basin soared during the energy boom of the 1970s before experiencing a steady decline in subsequent decades.
The US shale boom of the 2010s revived the area, with fracking and new drilling techniques that make development more affordable.
“If it were a country, the Permian Basin would be one of the largest producers of oil in the world,” says the website of the Federal Reserve Bank of Dallas.
The takeover comes as oil is trading at more than $85 a barrel, a relatively high historical benchmark.
In a conference call with analysts, Woods said that carrying out an all-stock purchase helps insulate ExxonMobil from the vagaries of the market, because the company’s stock moves in tandem with commodity prices.
ExxonMobil vowed that it would employ best practices on the environment, accelerating Pioneer’s plan to reach net zero emissions by 15 years to 2035 and employing technology to limit methane emissions.
But ExxonMobil has long faced criticism that it intentionally fueled doubts about climate change science in order to protect its core business — a point reiterated Wednesday by critics.
ExxonMobil and other big oil companies “are driving the world toward climate catastrophe,” said the Center for Climate Integrity.
“As the crisis accelerates, it’s more important than ever that officials call out their climate deception and hold these polluters accountable.”
Woods reiterated his defense of petroleum in an interview with CNBC.
Even as the world transitions to lower-carbon energy, fossil fuels will “continue to play a role over time,” Woods told CNBC. “That may diminish with time… but it will be around for a long time.”
Shares of Pioneer climbed 1.0 percent to $239.76 in afternoon trading, while ExxonMobil dropped 4.3 percent to $105.69.
