ExxonMobil to acquire Pioneer Natural Resources for $59.5bn: Impact on US energy landscape

Exxon Mobil Corporation (ExxonMobil) and Pioneer Natural Resources have signed an all-stock transaction worth $59.5 billion, with each of the latter’s shares exchanging for 2.3234 of the former’s shares. This transaction implies an enterprise value of $64.5 billion, inclusive of net debt.

Combining Forces in the Permian Basin

The merger integrates Pioneer Natural Resources’ 850,000 net acres in the Midland Basin with ExxonMobil’s 570,000 acres in both Delaware and Midland Basins. This joint venture would claim the title of the leading undeveloped U.S. unconventional resource position, boasting an impressive 16 billion barrels of oil equivalent in the Permian. Post-merger, ExxonMobil’s daily production in the Permian is set to more than double, potentially reaching 2 million barrels of oil equivalent by 2027.

ExxonMobil’s Chairman and CEO, Darren Woods, emphasized, “Pioneer is a clear leader in the Permian… The combined capabilities of our two companies will provide long-term value creation… Their tier-one acreage is highly contiguous, allowing for greater opportunities to deploy our technologies… and plan to accelerate Pioneer’s net-zero plan from 2050 to 2035.”

Pioneer Natural Resources CEO, Scott Sheffield, echoed this sentiment, saying, “The combination of ExxonMobil and Pioneer creates a diversified energy company with the largest footprint of high-return wells in the Permian Basin.”

Enhanced Environmental Initiatives and Production Efficiency

This collaboration aims to not only increase production but also reduce environmental impact. The synergy of Pioneer Natural Resources’ expansive Midland acreage and ExxonMobil’s industry prowess allows drilling up to four-mile laterals, reducing the number of wells and surface footprint. ExxonMobil plans to escalate their net-zero ambition from 2050 to 2035, leveraging combined operations to use over 90% recycled water in Permian fracturing by 2030.

Economic Impacts and Transaction Details

The merger showcases a unique opportunity to boost U.S. energy security, emphasizing technological, operational, and financial prowess. Furthermore, this move seeks to strengthen both companies’ shareholder value with projected immediate accretion to ExxonMobil’s earnings and cash flow.

The transaction was approved unanimously by both companies’ Boards and awaits further regulatory and Pioneer shareholder approvals. The deal’s expected conclusion is in the first half of 2024.

Advisors and Further Information

Citi, Centerview Partners, and Davis Polk & Wardwell counseled ExxonMobil, while Pioneer Natural Resources sought guidance from Goldman Sachs, Morgan Stanley, Petrie Partners, Bank of America Securities, and Gibson, Dunn & Crutcher LLP. The merger promises to amplify ExxonMobil’s upstream portfolio, combining the strengths of both companies for efficient resource recovery, technological advancements, and reinforcing the U.S. economy and energy security.