Exxon jockeys to dominate U.S. shale oil output

Exxon Mobil Corp. is in talks to acquire Pioneer Natural Resources Co., according to a person familiar with the matter, nearing its largest takeover in more than two decades as the energy giant seeks to become the dominant U.S. producer of shale oil.

An agreement could be worth as much as $60 billion and may be completed in the coming days provided there are no complications, according to the Wall Street Journal, which first reported the talks on Thursday. At that size, it would potentially be the world’s largest takeover this year.

The deal could also be Exxon’s biggest acquisition since merging with Mobil Corp. in 1999, marking its return to the top of the U.S. oil and gas industry after more than a decade in which upstart shale drillers set the agenda and drove growth.

Pioneer shares surged when trading opened in New York.

Though advanced, the transaction could still fall apart, the person said. Responding to requests for comment from Bloomberg, both Exxon and Pioneer said they don’t comment on “market rumors.”

A deal with Pioneer would unite two of the biggest acreage holders in the Permian Basin of Texas and New Mexico, making Exxon the formation’s dominant oil producer with an output of about 1.2 million barrels a day — more than many OPEC nations. It would also extend Exxon’s inventory of top-tier drilling locations in the basin by decades, providing low-cost, low-risk crude well beyond 2050 to feed its giant refinery network on the Gulf Coast.

“The logic of consolidation in the highly fragmented Permian shale remains compelling, with significant gains to be achieved from economies of scale,” Citigroup analysts including Alastair Syme said in a note. “This particular combination would create the largest Permian player and, even with a modest deal premium, we estimate can generate a positive return on investment.”

After pulling back on spending, cutting costs and reaping the benefits of pandemic-era investments, Exxon’s profits surged to a record $59 billion in 2022 as energy prices jumped following Russia’s invasion of Ukraine. Its stock gained more than 80% last year, providing the financial firepower for a potentially era-defining deal with Pioneer.

Exxon’s Chief Executive Officer Darren Woods told investors in July the company continued to review potential mergers and purchases, but would remain “picky” and focused on creating value.