On October 23, 2023 ExxonMobil announced the acquisition of Pioneer Natural Resources in an all-stock transaction valued at approximately $64.5 billion. The acquisition would combine Pioneer’s more than 856,000 acres in the Midland Basin with ExxonMobil’s 570,000 net acres in the adjacent Delaware and Midland Basins resulting in an estimated 16 billion barrels of oil equivalent resources in the Permian Basin. In its announcement ExxonMobil explained the rationale for the acquisition:

• “Transforms ExxonMobil’s upstream portfolio, more than doubling the company’s Permian footprint and creating an industry-leading, high-quality, high-return undeveloped U.S. unconventional inventory position.”
• “Expect to generate double-digit returns by recovering more resource, more efficiently and with lower environmental impact.”
• “Combines Pioneer’s sizeable acreage, entrepreneurial culture and deep industry expertise with ExxonMobil’s balance-sheet strength, advanced technologies and industry-leading project development capabilities.”

· Plans to accelerate Pioneer’s net zero Permian ambition from 2050 to 2035.”

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The market had a negative reaction to the deal, sending ExxonMobil’s stock price down four percent from $119.45 to $106.45 due to the price and structure of the deal. Reflecting how short term the market can be, exactly one week later the price was $112.95.

Analysts’ reactions were mixed. On the positive side, Jeff LeBlanc, Equity Analyst, Tudor, Pickering, Holt & Co said, “While we believe XOM already held the most attractive global upstream portfolio in the space longer-term, we believe this deal further cements that characterization given our highly favorable view of the PXD assets that we believe will provide XOM with best-in-class short-cycle investment flexibility.” On the negative side, Tom Ellacott, Senior Vice President, Corporate Research, Wood Mackenzie noted that “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. Bulking up materially in oil and gas also adds to the challenges of pivoting to low-carbon, especially if the energy transition accelerates.”

The Economist had a positive view, justifying the price paid since “Consolidation will transform America’s fragmented shale industry” and “Shale looks a much more profitable bet than it did a few years ago.” Charlie Penner, who led the Engine No. 1 campaign which placed three new directors on the board of ExxonMobil, noted another advantage of shale production which is that it “has the ability to flex production up and down in response to changes in demand” in contrast to conventional oil and gas projects that require massive investments that require decades of production to pay off.

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