Exxon will acquire Pioneer, a shale competitor, for roughly $60 billion in shares

 Exxon will acquire Pioneer, a shale competitor, for roughly $60 billion in shares

Exxon Mobil said on Wednesday that it will purchase American competitor Pioneer Natural Resources for $59.5 billion in an all-stock transaction, making it the dominant producer in the largest U.S. oilfield and guaranteeing ten years of low-cost output.

The acquisition would be the largest by any firm this year and the largest by Exxon since its $81 billion purchase of Mobil Oil in 1998, which was done before the start of the shale revolution.

For Pioneer, Exxon has made a bid of $253 per share. In premarket trade, Pioneer shares, which ended at $237.41 on Tuesday, were trading 1.1% higher at $239.98. Shares of Exxon remained unchanged.

Exxon has emerged from a time of significant losses and massive debts over the last two years by reducing expenses, liquidating dozens of assets, and taking advantage of the high oil prices brought on by Russia's invasion of Ukraine.

The $253 price per share is a 9% premium above Pioneer's 30-day average price before news of the merger broke on October 5th.

Reuters' estimates show that the deal's value represents a 6.57% premium over Pioneer's most recent closing.

The agreement would give four of the biggest U.S. oil firms control over a substantial portion of the Permian Basin's massive oilfield infrastructure and shale field.

CEO Darren Woods has defied political and financial pressure to change course and embrace renewable energy, as have European oil companies. He received harsh criticism for maintaining a heavily oil-dependent policy as environmental worries became increasingly serious.

"The combined capabilities that we have two companies will yield long-term value creation well in excess of what each business is capable of doing on a standalone basis," Tiger said in a statement.

The choice paid off as the business this year posted a record $56 billion profit, two years after losses during the COVID-19 epidemic grew to $22 billion.

According to experts, Exxon saved part of the enormous earnings from the rise in oil prices by setting aside around $30 billion in cash in anticipation of acquisitions.

According to RBC Capital Markets analysts, Pioneer is the biggest operator in the Permian, accounting for 9% of total production, while Exxon is in fifth place with 6%.

Exxon and Pioneer had a decent chance of completing their merger, antitrust experts told Reuters last week, despite the fact that they would be subject to intense scrutiny. This is due to the possibility that they will only make up a tiny portion of the enormous worldwide market for oil and gas.

Pioneer has been one of the most prosperous oil firms to come out of the shale revolution, which in less than a decade transformed the United States from a significant oil importer into the greatest producer in the world.

The Permian Basin is highly prized by the American energy sector due to its very cheap oil and gas extraction costs, which average about $10.50 per barrel.

Under the leadership of CEO Scott Sheffield, Pioneer expanded via a series of quick acquisitions, including multibillion dollar agreements for DoublePoint Energy and Parsley Energy in 2021.

Exxon's acquisition would surpass oil company Shell's $53 billion purchase of BG Group in 2016, which gave Shell the top spot in the world market for liquefied natural gas.

Exxon and Denbury, a tiny U.S. oil company with a network of carbon dioxide pipes and underground storage, reached an agreement on a $4.9 billion all-stock purchase in July. The goal of such transaction was to support Exxon's emerging low-carbon sector.

The biggest U.S. oil company first made an all-cash offer for Denbury but changed it at the last minute to all stock, taking into account both the target's increase in market value during the negotiations and investors' desire to profit from any future gains in Exxon's stock.

Since falling to about $30 in early 2020 because to the drop in oil and gas prices, the share price of the oil giant has had a significant recovery. Recently, the price of Exxon shares reached an all-time high of $120.