Leading stocks jump after massive merger talks with Exxon

Oct 6 (Reuters) – Shares of Pioneer Natural Resources (PXD.N) rose about 11% on Friday on news that Exxon Mobil (XOM.N), the largest U.S. oil and gas company, is in advanced talks to buy the shale oil producer. In a deal worth $60 billion.

The deal will be Exxon’s largest since its $81 billion acquisition of Mobil in 1998. It will make the company one of the major producers in the lucrative Permian Basin, the largest shale oil field in the United States where the country’s oil production is approaching an unprecedented level. A record number of 13 million barrels per day.

Pioneer shares were trading at $238.50 on Friday, valuing the company at about $56 billion, while Exxon shares fell 1.6%. The offer includes a roughly 20% premium to Pioneer’s Thursday close. The value of the deal can change at any time during negotiations.

The premium is in line with other exploration and production mergers this year, but “still strikes us as a bit low for a company of the size and unique quality of stock held by Pioneer,” said Andrew Dittmar, a director at Enverus.

Friday’s gains leave Pioneer stock below the implied offer, as the two companies likely will not reach an agreement.

“We don’t expect Exxon to pay a significant premium for the asset given the limited number of alternative buyers for something of this size,” said Biraj Purkataria, an analyst at RBC Capital Markets.

Pioneer has an estimated 6,300 net locations of high-quality inventory, according to Enverus.

The value of the deal means Exxon is paying about $4.5 million for the high-quality Pioneer sites and $3.7 million for all sites, exceeding recent merger and acquisition trends that valued the assets at about $3 million per site, Enviros said.

If negotiations are concluded successfully, an agreement could be reached between Exxon and Pioneer in the coming days, Reuters reported on Thursday, citing three sources.

However, any deal could attract political and regulatory scrutiny.

“Pioneer is the largest operator in the Permian Basin with 9% of total production while Exxon is No. 5 with 6%. They total 15% of Permian Basin operated production, but only 6% of total US production. Points This data is relevant given the Federal Trade Commission’s scrutiny over “consolidation,” Scott Hannold, an RBC Capital Markets analyst, said in a note.

U.S. crude oil production rose to nearly 13 million barrels per day in July, just shy of the record high set in November 2019.

Major oil companies focused on returning cash to shareholders rather than boosting production. They have been slow to increase spending despite record profits and near-record U.S. oil production.

Industry experts said the deal could set a precedent for more large-scale mergers and acquisitions in the sector.

“If ExxonMobil is crowned the undisputed king of the Permian Basin in the coming days, the shale sector will essentially become a more mature, consolidated business,” said Matthew Bernstein, senior shale analyst at Rystad Energy.

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