Exxon-Pioneer Deal Is Massive
by Andreas Exarheas
click here to read the original article at Rigzone.com
*this article was not written by Roseland Oil & Gas
Wood Mackenzie’s Senior Vice President of Corporate Research, Tom Ellacott, has described Exxon’s Pioneer purchase as “a massive oil deal that demonstrates ExxonMobil’s bullishness on longish-term oil demand and prices”.
“This deal is far from counter-cyclical,” Ellacott told Rigzone.
“The acquisition of Pioneer positions ExxonMobil as the dominant operator in the world’s premier short-cycle, advantaged-barrel basin,” he added.
“It secures decades of supply for ExxonMobil’s growing integrated full value-chain infrastructure that stretches from the Permian to the Gulf Coast – including midstream, refining, petrochemicals, carbon management, LNG, commodity exports,” he continued.
Ellacott told Rigzone that the deal was done from a position of strength for Exxon, describing it as “a deal of choice rather than of necessity”.
“ExxonMobil already has one of the strongest oil and gas production growth outlooks this decade, supported by an opportunity-rich upstream portfolio,” he said.
The Wood Mackenzie VP noted that this is probably the first time in the last half decade that ExxonMobil has the balance sheet strength, strategic flexibility, and the market credibility to add Pioneer to its portfolio and keep investors on board.
“Very few of its peers could do this deal today,” he stated.
“But ExxonMobil will need to demonstrate it can extract value from its biggest deal this century,” he added.
“The transaction may also mean delaying other strategic priorities. The acquisition of an elite oil-tilted opportunity will increase what is already easily the most oil-weighted portfolio in the peer group – at a time when some peers are shifting their portfolios to gas,” he said.
“Bulking up materially in oil and gas also adds to the challenges of pivoting to low-carbon, especially if the energy transition accelerates,” he went on to state.
Also commenting on Exxon’s acquisition, Wood Mackenzie’s Vice President of Upstream Research, Rob Clarke, told Rigzone that the deal “rapidly distances ExxonMobil from all other Permian competitors”.
“With a single move, the combined portfolio produces 1.3 million barrels of oil equivalent per day with considerable upside,” he said.
“ExxonMobil’s new scale skyrockets beyond even the boldest long-term growth targets established by others,” he added.
All-Stock Transaction
On Wednesday, Exxon Mobil Corporation and Pioneer Natural Resources jointly announced a definitive agreement for ExxonMobil to acquire Pioneer.
The merger is an all-stock transaction valued at $59.5 billion, or $253 per share, based on ExxonMobil’s closing price on October 5, the companies noted in a joint statement, adding that, under the terms of the agreement, Pioneer shareholders will receive 2.3234 shares of ExxonMobil for each Pioneer share at closing.
The implied total enterprise value of the transaction, including net debt, is approximately $64.5 billion, the companies highlighted in the statement.
This deal combines Pioneer’s more than 850,000 net acres in the Midland Basin with ExxonMobil’s 570,000 net acres in the Delaware and Midland Basins, “creating the industry’s leading high-quality undeveloped U.S. unconventional inventory position”, the statement noted.
Together, the companies will have an estimated 16 billion barrels of oil equivalent resource in the Permian, according to the statement, which pointed out that, at close, ExxonMobil’s Permian production volume would more than double to 1.3 million barrels of oil equivalent per day, based on 2023 volumes, and is expected to increase to approximately two million barrels of oil equivalent per day in 2027.
“ExxonMobil believes the transaction represents an opportunity for even greater U.S. energy security by bringing the best technologies, operational excellence and financial capability to an important source of domestic supply, benefitting the American economy and its consumers,” the statement noted.
“Pioneer is a clear leader in the Permian with a unique asset base and people with deep industry knowledge,” ExxonMobil Chairman and CEO Darren Woods said in the statement.
“The combined capabilities of our two companies will provide long-term value creation well in excess of what either company is capable of doing on a standalone basis,” he added.
“Their tier-one acreage is highly contiguous, allowing for greater opportunities to deploy our technologies, delivering operating and capital efficiency as well as significantly increasing production,” Woods continued.
“As importantly, as we look to combine our companies, we bring together environmental best-practices that will lower our environmental footprint and plan to accelerate Pioneer’s net-zero plan from 2050 to 2035,” he went on to state.
Pioneer Chief Executive Officer Scott Sheffield said, “the combination of ExxonMobil and Pioneer creates a diversified energy company with the largest footprint of high-return wells in the Permian Basin”.
“As part of a global enterprise, Pioneer, our shareholders and our employees will be better positioned for long-term success through a size and scale that spans the globe and offers diversity through product and exposure to the full energy value chain,” he added.
“The consolidated company will maintain its leadership position, driving further efficiencies through the combination of our adjacent, contiguous acreage in the Midland Basin and our highly talented employee base, with the improved ability to deliver durable returns, creating tangible value for shareholders for decades to come,” he continued.
The boards of directors of both companies have unanimously approved the transaction, which is subject to customary regulatory reviews and approvals, the statement highlighted, adding that it is also subject to approval by Pioneer shareholders. The deal is currently expected to close in the first half of 2024.
by Andreas Exarheas
click here to read the original article at Rigzone.com
*this article was not written by Roseland Oil & Gas