Exxon Mobil Corp. confirmed Wednesday an agreement to buy shale driller Pioneer Natural Resources Co. in an all-stock deal valued at $59.5 billion, or $64.5 billion including debt.
“Pioneer is a clear leader in the Permian with a unique asset base and people with deep industry knowledge,” said Exxon Mobil Chief Executive Darren Woods. “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.”
Pioneer shares rose 1.9% in premarket trading, while Exxon’s stock fell 1.3%.
Under terms of the deal, Pioneer shareholders will receive 2.3234 Exxon shares
XOM,
for each Pioneer share
PXD,
they own. The companies said that based on the Oct. 5 closing prices of $108.99 for Exxon’s stock and $214.96 for Pioneer’s stock, the deal values Pioneer shares at $253.23 each, or a 17.8% premium.
The Wall Street Journal had reported on Oct. 5 that a deal was near.
The deal combines Pioneer’s more than 85,000 net acres in the Midland Basin with Exxon’s 570,000 net acres in the Delaware and Midland Basins. Combined, the companies will have an estimated 16 billion barrels of oil equivalent in the Permian.
Exxon, Pioneer merger provides an estimated combined 16 billion barrels of oil equivalent resource in the Permian.
Exxon Mobil Corp.
Exxon said the merger will increase its lower-cost-of-supply production and short-cycle capital flexibility. From Pioneer’s assets, the company expects a cost of supply of less than $35 per barrel.
Exxon said the deal will accelerate plans to achieve net zero greenhouse gas emissions in the Permian, as the company plans to use its own plans to accelerate Pioneer’s net-zero emissions plan by 15 years, to 2035.
The deal is expected to immediately add to Exxon’s earnings per share and free cash flow when it closes, which is expected to occur in the first half of 2024. The merger is expected to result in “significant” synergies.
Siebert Williams Shank analyst Gabriele Sorbara expects the deal, which “fits perfectly” for Exxon, to generate about $2 billion of synergies over the next decade. Sorbara also sees an “inflection to improved well productivity” in the second half of 2023 and beyond, which isn’t currently reflected in analyst expectations, so it boost the benefit to Exxon.
While Sorbara expects some scrutiny from the Federal Trade Commission, but believes “the deal should ultimately close,” without the receipt of a competing bid.
Citi was lead financial advisor to Exxon, and Centerview Partners was financial advisor and Davis Polk & Wardwell was legal advisor. For Pioneer, Goldman Sachs, Morgan Stanley, Petrie Partners and Bank of America Securities were financial advisors and Gibson, Dunn & Crutcher LLP was legal advisor.
Exxon’s stock has rallied 12.7% over the past 12 months through Tuesday and Pioneer shares have slipped 3.5%. In comparison, the Energy Select Sector SPDR ETF
XLE
has climbed 11.6% and the S&P 500 index
SPX
has advanced 21.4%.