How the oil market will change with the Exxon-Pioneer deal
ExxonMobil, one of the largest oil companies in the world, wants to acquire Pioneer, one of the largest producers of shale oil in the United States. A 60 billion dollar operation that is part of a specific strategy. Here's which one. All the details
The American oil company ExxonMobil, one of the main Big Oil companies on the planet, is expected to announce today a purchase operation of Pioneer Resources, a smaller but very important company in the US shale oil industry, the oil extracted from shale rocks, especially of the Permian basin.
THE VALUE OF THE OPERATION
The estimated value of the operation is 58 billion dollars, writes Bloomberg . Exxon's valuation on Tuesday was $442 billion. It seems that the company – according to Reuters sources – will proceed with an offer of 250 dollars per share of Pioneer, which yesterday closed at 237.4 dollars and today, in the premarket , they were trading at 244 dollars.
If the deal goes through, it would be both the largest acquisition ever of 2023, and the largest acquisition in Exxon's history after that of Mobil Oil in 1999, for 81 billion. The agreement would also guarantee Exxon control – both over resources and infrastructure – of a large part of the Permian basin, a rich oil field between Texas and New Mexico that has transformed the United States into the main crude oil producing country and natural gas to the world within a decade.
ANTITRUST PROBLEMS IN VIEW?
According to analysts, it is likely that the Exxon-Pioneer deal will pass the scrutiny of antitrust authorities because the company, even after becoming the dominant player in the Permian, will still be able to claim to control only a small slice of the vast global oil & gas market. gas .
EXXON'S STRATEGY
Furthermore, the difference between Exxon's strategy and that of European oil companies towards the ecological transition is notable: while the latter – generally – have started to focus more on renewable energy, Exxon has remained focused on oil. From an economic point of view, this strategy – carried out by CEO Darren Woods – has paid off: in 2022 the company reported a record profit of 56 billion dollars, just two years after the loss of 22 billion during the coronavirus pandemic.
Woods had been looking for oil companies in the Permian to acquire for some time, but the deals were postponed due to the impact of the pandemic on Exxon's finances.
EVERYTHING ABOUT PIONEER RESOURCES
Pioneer is one of the most successful shale oil companies, one of the few to have survived the boom and bust cycles of the so-called “shale revolution”. Today it is the third largest oil producer in the Permian basin, after Chevron and ConocoPhilips, and can boast very low extraction costs, around 10.5 dollars a barrel.
Industry analysts have been wondering about Pioneer's fate for months after its founder and CEO, Scott Sheffield, announced last April that he would retire at the end of 2023. Sheffield is literally a "pioneer" of the technology industry. shale, with fifty years of experience working in the Permian Basin.
A SIGNAL TO THE OIL MARKET
The possible acquisition of Pioneer would send a strong message to the oil market because – beyond what has already been said – it would signal that Exxon, known for megaprojects, also wants to dedicate itself to short-cycle activities. Given the uncertainties about oil demand in the medium term, Laura Hurst explained in Bloomberg , “shale flexibility is an interesting proposition”.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/exxon-pioneer-acquisizione/ on Wed, 11 Oct 2023 12:19:38 +0000.