(Bloomberg) – Exxon Mobil Corp. is nearing a $58 billion deal to buy Pioneer Natural Resources Co., bolstering a bet that oil and gas will remain central to the world’s energy mix for decades, no matter what path nations take toward a lower energy transition – Carbon future.
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Exxon is in talks to pay more than $250 a share for the Irving, Texas-based shale producer, according to a person familiar with the matter. An all-stock deal could be announced as early as Wednesday, said people familiar with the matter, speaking on condition of anonymity because the matter is not public.
A final agreement has not yet been reached and terms could change or the talks could still end without an agreement, the people said. Representatives for Exxon and Pioneer declined to comment.
A deal at $250 per share would be a 16% premium to Pioneer’s closing price of $214.96 on Thursday, before reports emerged that the two companies were in talks. That would make Pioneer worth at least $58 billion, based on the number of shares outstanding, according to data compiled by Bloomberg.
The deal would be the largest corporate takeover announced globally this year and Exxon’s largest acquisition since its merger with Mobil Corp. in 1999. Big strategic bets with the potential to shape the future of the world’s energy system have strong precedent at Exxon, which has weathered wars, nationalization and public outcry in its 140-year history.
Read more: Exxon CEO’s pursuit of mega-deal is a bet on the oil sector’s staying power
A merger would unite two of the largest acreage owners in the Permian Basin of Texas and New Mexico and make Exxon the formation’s dominant oil producer by far. The region is the most productive oil field in the U.S. and has a wide inventory of yet-to-be-drilled sites that could be brought online quickly to give Exxon more flexibility and keep pace with global demand.
The story goes on
While the US shale boom was driven by independent producers like Pioneer, many of these companies have not survived the multiple downturns of the past decade. Now, with the energy transition making medium-term oil demand so uncertain, the flexibility of shale oil is an attractive proposition for companies like Exxon.
A Pioneer sale could spark similar interest in shale producers from companies with strong balance sheets like Chevron Corp., according to analysts at Bloomberg Intelligence. or Occidental Petroleum Corp. wake up.
Read more: Exxon’s push against Pioneer is significant for Shale
Pioneer rose 0.8% in New York trading on Tuesday to close at $237.41, giving the company a market value of about $55 billion. After the close of trading, the shares rose by 3%. Exxon fell 0.4% to $110.45, giving it a market value of about $442 billion.
Exxon has been looking for major acquisitions in the Permian Basin for years, but the timing has never been quite right. The company’s finances took a hit during the coronavirus pandemic as oil prices collapsed and investment for major global projects increased, forcing Exxon to borrow billions of dollars to pay dividends.
Then the company pared back spending, cut costs and enjoyed a huge boost when oil prices rose after Russia’s invasion of Ukraine. Its profit jumped to a record $59 billion in 2022 and its shares rose more than 80% last year, providing the financial firepower for a potentially game-changing deal with Pioneer.
Attention has turned to Pioneer’s future since founder and Chief Executive Officer Scott Sheffield said in April he planned to retire at the end of the year. Sheffield has been working in the Permian since the 1970s and is considered the architect of the shale boom that turned the United States into an oil and natural gas powerhouse.
– With assistance from Gillian Tan, Mitchell Ferman, Stephen Stapczynski and Joe Ryan.
(Updates with details throughout.)
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