The takeover of Pioneer Natural Resources sent shockwaves through the markets. Indeed, the share price of US oil group Pioneer Natural Resources soared on the New York Stock Exchange, boosted by rumors of an acquisition by the giant ExxonMobil, an operation estimated at $60 billion. At around 16:00 GMT, Pioneer’s share price was up 11.03% at $238.55 on the New York Stock Exchange. ExxonMobil, on the other hand, was down 1.57% at $107.28.
Rumours of a Monumental Acquisition
The Wall Street Journal (WSJ) reports in its Friday edition that ExxonMobil “is close to a deal” to absorb one of the U.S. shale oil giants. Pioneer’s market capitalization was around $50 billion before these press reports, while ExxonMobil’s market capitalization was around $420 billion on Friday morning. Contacted by AFP, ExxonMobil declined to comment on what it described as market rumors.
The pending transaction would give ExxonMobil a new footprint in the Permian Basin, a large-scale oil-producing region covering western Texas and southeastern New Mexico. According to the WSJ, referring to a source close to the matter, an announcement could be made “in the next few days, but it’s still possible that there won’t be one.”
An Analysis of ExxonMobil’s Results
ExxonMobil posted a record net profit of $55.7 billion in 2022, thanks in large part to the significant rise in hydrocarbon prices linked to the recovery in demand and the drying up of Russian supply. This trend continued in the first quarter of 2023, with net income doubling year-on-year. However, in the second quarter, earnings fell by 56%, as did sales, which dropped from $115.68 billion to $82.91 billion. Nevertheless, the Group has abundant liquidity.
According to JPMorgan analysts, although oil giants like ExxonMobil have historically been reluctant to carry out mergers and acquisitions when oil prices were high, several factors are currently converging to make the deal plausible. These factors include the up-and-down performance of Pioneer’s share price despite a positive operating situation, the forthcoming retirement of its founder and CEO Scott Sheffield, and ongoing consolidation in the shale gas sector.
Potentially historic development
The WSJ points out that, should this acquisition go ahead, it would be ExxonMobil’s biggest since its monumental merger with Mobil in 1999. This would enable ExxonMobil to strengthen its position in the rich Permian oil basin of West Texas and New Mexico, an essential region for its growth projects.
For Peter McNally, analyst at Third Bridge, “integrating the exploration and production capabilities of Exxon and Pioneer with their processing and refining activities could generate economic benefits for both companies.”
Pioneer Natural Resources, which is headquartered in Dallas, Texas, and was founded in 1997, employs over 2,000 people, according to its website. In 2022, the company posted net earnings of $7.8 billion on sales of $24.29 billion.
The potential acquisition of Pioneer Natural Resources by ExxonMobil has shaken the financial and energy markets. If successful, this operation could redefine ExxonMobil’s position in the oil sector, strengthening its presence in the Permian Basin, a region crucial to the company’s future.
Pioneer’s fluctuating performance despite solid fundamentals, combined with other market factors, made this acquisition a possibility. If it goes ahead, it would be ExxonMobil’s biggest deal since its merger with Mobil in 1999, marking an important milestone in the company’s evolution.
However, as with any transaction of this scale, uncertainties remain. The market is waiting with bated breath to see if this announcement materializes in the next few days. The outcome of this transaction will undoubtedly have a significant impact on the financial and energy landscape, and we’ll be keeping a close eye on its progress.
