ExxonMobil and Pioneer Natural Resources announced a merger, which combines Pioneer’s 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. Together, the companies are going to have an estimated 16 billion barrels of oil equivalent resource in the Permian.
At the closing of the deal, ExxonMobil’s Permian production volume would more than double to 1.3 million barrels of oil equivalent per day (MOEBD), based on 2023 volumes, and is expected to increase to approximately 2 MOEBD in 2027. ExxonMobil believes the deal represents an opportunity for even greater U.S. energy security by bringing the best technologies, operational excellence and financial capability to an important domestic supply source, benefitting the American economy and its consumers.
This deal combines Pioneer’s differentiated Permian inventory and basin knowledge with ExxonMobil’s proprietary technologies, financial resources, and industry-leading project development – which is is expected to generate double-digit returns by recovering more resource, more efficiently and with a lower environmental impact.
The deal is a unique opportunity to deliver leading capital efficiency and cost performance and increase production by combining Pioneer’s large-scale contiguous, high-quality undeveloped Midland acreage with ExxonMobil’s demonstrated industry-leading Permian resource development approach.
The complementary fit of Pioneer’s contiguous acreage will allow ExxonMobil to drill long laterals up to four miles, resulting in fewer wells and a smaller surface footprint. And the company also expects to enhance field digitalization and automation that will optimize production throughput and cost.
The combination transforms ExxonMobil’s upstream portfolio by increasing lower-cost-of-supply production and short-cycle capital flexibility. And ExxonMobil expects a cost of supply of less than $35 per barrel from Pioneer’s assets. By 2027, short-cycle barrels will comprise more than 40% of the total upstream volumes, positioning the company to more quickly respond to demand changes and increase capture of price and volume upside.
The merger is anticipated to be accretive immediately and highly accretive mid- to long-term to ExxonMobil earnings per share and free cash flow, with a long cash flow runway. And ExxonMobil’s strong balance sheet combined with Pioneer’s added surplus free cash flow provides upside opportunity to enhance shareholder capital returns post-closing.
This merger also represents the opportunity for even greater U.S. energy security by bringing the best technology, operational excellence, environmental best practices and financial capability to an important source of domestic supply, benefitting the American economy and its consumers.
Net Zero in the Permian
ExxonMobil has plans to achieve net zero Scope 1 and Scope 2 greenhouse gas emissions from its Permian unconventional operations by 2030. As part of the deal, ExxonMobil plans to leverage its Permian greenhouse gas reduction plans to accelerate Pioneer’s net zero emissions plan by 15 years, to 2035.
ExxonMobil will utilize the same aggressive strategy and apply its industry-leading new technologies for monitoring, measuring, and addressing fugitive methane to lower both companies’ methane emissions. And by using combined operating capabilities and infrastructure, we expect to increase the amount of recycled water used in our Permian fracturing operations to more than 90% by 2030.
Deal Details
The per-share merger consideration noted above represents an approximate 18% premium to Pioneer’s undisturbed closing price on October 5 and it is a 9% premium to its prior 30-day volume-weighted average price on the same day.
The Boards of Directors at both companies have unanimously approved the transaction, which is subject to customary regulatory reviews and approvals. The deal is also subject to approval by Pioneer shareholders. The deal is expected to close in the first half of 2024.
KEY QUOTES:
“Pioneer is a clear leader in the Permian with a unique asset base and people with deep industry knowledge. 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. 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. 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.”
- ExxonMobil Chairman and CEO Darren Woods
“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. 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.”
- Pioneer Chief Executive Officer Scott Sheffield
