Exxon to Acquire Pioneer for $60 Billion, Doubling Oil and Gas Production

ExxonMobil, the largest Western oil producer, has reached an agreement to acquire one of the leading players in the shale oil market, Pioneer Natural Resources, for $59.6 billion. 

This is reported by The New York Times.

The move is poised to trigger a wave of consolidation in the U.S. extraction industry. This development secures Exxon's dominant position in the Permian Basin, a vast reserve spanning west Texas and New Mexico, which has helped make the U.S. the world's largest oil and gas producer.

Pioneer is a leading operator in the Permian Basin, and this deal transfers 15% of the production in the region under Exxon's control, according to RBC Capital Markets. Following the acquisition, Exxon's production in the Permian Basin will increase by more than double, reaching 1.3 million barrels per day. This transaction transforms the company's oil and gas business, reducing costs and expanding capabilities to rapidly increase production.

The purchase of Pioneer is ExxonMobil's largest acquisition since its formation in 1999 as a result of the merger between Exxon and Mobil. This also marks the first significant acquisition under the leadership of Darren Woods, who has been at the helm of Exxon since 2017.

"The combined capabilities of our two companies will provide long-term value creation well beyond what each could accomplish individually," said Woods in a conversation with reporters.

Woods emphasized that Exxon and Pioneer will collaborate to reduce emissions. 

"As long as the world needs oil and gas," he stated, the companies will work toward conducting the "most efficient, effective, and responsible" operations.

The move highlights Exxon's determination to increase oil production, despite forecasts that climate change will eventually lead the world to transition to renewable energy sources.

Exxon essentially counts on the expectation that U.S. energy policy will not significantly impede the use of fossil fuels.

The Houston-based company is on the lookout for acquisitions after amassing significant funds over the past year. Russia's invasion of Ukraine led to a sharp increase in oil prices, resulting in a significant boost in profits for oil companies. In early February of this year, Exxon reported record profits of $56 billion for 2022. 

Oil and gas production in 2022 increased by approximately 100,000 barrels per day to reach 3.8 million barrels per day. Analysts anticipate that this deal will signify the consolidation of the still-fragmented U.S. shale industry, which has experienced cycles of boom and bust over the past decade.