Oct 6 (Reuters) – Pioneer Natural Resources ( PXD.N ) shares jumped nearly 8% on Friday on news that U.S. oil and gas giant ExxonMobil ( XOM.N ) is in advanced talks to buy a shale producer. In a deal worth $60 billion.
It would be Exxon’s largest acquisition since its $81 billion takeover of Mobil in 1998. It will make the company one of the leading producers in the lucrative Permian Basin, the largest U.S. shale oil field, when the nation’s oil production ends entirely. A record 13 million barrels per day.
Shares of Pioneer traded at $235.25 on Friday, valuing the company at nearly $55 billion. The offer represents an approximately 9% premium to Pioneer’s Thursday close.
As the two companies are unlikely to come to an agreement, Friday’s gains dampened the stock’s value of the deal.
The premium has been with other E&P mergers this year, but “is still a bit low for a company with the unique scale and quality of inventory that Pioneer has,” said Andrew Dittmar, a director at Enverus.
“This is a significant win for Exxon…at an attractive price to acquire a unique Permian portfolio.”
Pioneer has 6,300 high-quality inventory net locations, according to Enverus.
The deal value pays about $4.5 million for Pioneer’s high-end locations and $3.7 million for all locations, above recent M&A trends, with Exxon paying $3 million per location for assets, Enverus said.
If the talks are successful, an agreement between Exxon and Pioneer could be reached in the coming days, Reuters reported, citing three sources.
However, any deal is subject to political and regulatory scrutiny.
“Pioneer is the largest operator in the Permian at 9% of total production, while Exxon is 5th at 6%. Operated is 15% of Permian production but only 6% of total US production. These data points are subject to FTC scrutiny. Consolidation,” RBC said. Capital Markets analyst Scott Hanold said in a note.
US crude oil production rose to 13 million barrels per day (bpd) in July, slightly below the record set in November 2019.
However, oil companies have curbed their spending on exploration in the past few years due to expectations of growth in renewable energy.
Industry experts said the deal could set a precedent for more large-scale M&A in the sector.
“This is the beginning of a major consolidation in the industry,” said Bill Smead, chief investment officer of Smead Capital Management, which manages a $5.2 billion fund with a quarter in oil and gas.
Reporting by Mrunalika Roy, Sourasis Bose and Arunima Kumar in Sabrina Valley, Bengaluru and Houston; Editing by Sriraj Kallu
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