This is the largest acquisition for ExxonMobil since the megamerger of Exxon with its compatriot Mobil in 1999. The American oil company announced, Wednesday October 11, the acquisition of its compatriot Pioneer Natural Resources, a heavyweight in the sector, for approximately $60 billion.
The acquisition, which is expected to be completed in the first half of 2024, will give ExxonMobil, already one of the world’s largest oil companies, a stronger foothold in the Permian Basin, a huge oil region that covers West Texas and southeastern New Mexico. Production in this region represents 5.8 million barrels of oil per day, or approximately 45% of American production. It should also allow the oil company to take a decisive turn in order to strengthen its position in the exploitation of shale oil and gas.
In detail, ExxonMobil will pay entirely in shares and buy the Texas company Pioneer for $59.5 billion, based on ExxonMobil’s October 5 closing price. The overall transaction, including debt, is valued at approximately $64.5 billion, the companies said.
Double talk on global warming
By acquiring Pioneer, ExxonMobil intends to more than double the volume of its daily production of barrels of oil equivalent in the Permian Basin, reaching 1.3 million barrels per day upon completion of the acquisition, before approximately 2 million in 2027. For comparison, ExxonMobil had posted a total production of 3.7 million barrels of oil equivalent per day in 2022.
Drilling area “highly contiguous” of the two companies will allow “greater possibilities for deploying our technologies, ensuring operational and financial efficiency as well as a significant increase in production”noted Darren Woods, the boss of ExxonMobil, quoted in the press release.
The two companies highlighted in their press release their objective of achieving carbon neutral production in the Permian Basin for Pioneer as early as 2035, rather than in 2050 as previously planned.
However, they could attract the wrath of environmental defenders, at a time when calls to move away from fossil fuels are increasing around the world due to climate change. Major global private oil companies (including Shell, ExxonMobil and BP) are the target of criticism, even lawsuits, for their continued investments in hydrocarbons.
A study published in January this year in the journal Science hit the nail on the head, showing that as early as the 1980s ExxonMobil had remarkably accurate forecasts of global warming, produced by its own scientists. Despite this, the company has for years publicly cast doubt on the state of scientific knowledge on the subject.
Long history of oil production in the Permian Basin
Oil production in the Permian Basin has a long history, with the first wells dating back to 1920. The region then boomed in the 1970s before experiencing a steady decline over the following decades.
The shale boom of the 2010s has revived the regional economy, thanks to hydraulic fracturing and new drilling techniques that make exploiting the deposits more affordable.
However, environmental advocates have long argued that hydraulic fracturing (frackingin English), causes earthquakes and carries risks of pollution, for a limited immediate energy production potential.
This rapprochement comes as oil is currently trading around $85 per barrel, a historically high price.
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ExxonMobil earned a record net profit of nearly $56 billion in 2022 thanks to the sharp rise in hydrocarbon prices linked to the recovery in demand and the drying up of Russian supply.
Pioneer Natural Resources, headquartered in Irving, near Dallas, Texas, posted net profit of $7.8 billion last year on sales of more than $24 billion. In electronic transactions preceding the opening of the New York Stock Exchange, ExxonMobil’s stock fell 3% on Wednesday, while conversely that of Pioneer gained 1.6%.