Exxon in talks to buy US rival Pioneer

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ExxonMobil is in talks to buy Pioneer Natural Resources in what would be the oil major’s biggest acquisition in more than two decades, according to people familiar with the matter.

Exxon’s targeting of Pioneer, which has a market capitalisation of $50bn and is the biggest crude producer in Texas, comes as the company, flush with cash after a series of bumper quarterly profits, has been scouring for acquisitions to expand production.

The deal would be Exxon’s biggest since it was formed in a historic tie-up between Exxon and Mobil in 1999. Purchasing Pioneer would transform Exxon’s footprint in the sprawling Permian Basin of Texas and New Mexico — America’s most prolific oilfield — and cement its position as the leading western oil major.

Exxon and Pioneer declined to comment. The talks between the companies were first reported by the Wall Street Journal on Thursday.

For Pioneer, a takeover would mark the end of an era for a company that was founded by Scott Sheffield in 1997 and rode the ups and downs of the shale boom that transformed the US into the world’s biggest oil and gas producer. 

In 2021, Pioneer bought Parsley Energy — founded by Sheffield’s son, Bryan — and private operator Double Point Energy in deals worth a combined $11bn, to become the largest oil producer in the state of Texas. 

The talks with Exxon come after Sheffield senior — one of the industry’s longest standing executives — announced in April that he planned to retire as head of the shale company for a second time at the end of 2023. 

A deal would be the latest in a wave of merger and acquisition activity sweeping through America’s shale patch as companies look to consolidate. 

After years of profligate spending, Wall Street has insisted companies ditch costly drilling ventures and instead return cash to shareholders. That has left acquisitions as the only means to significantly expand and companies have raced to acquire a dwindling number of prime drilling sites. 

Exxon most recently splurged $5bn on Denbury Resources in July, acquiring its extensive network of pipelines. Buying Pioneer would easily outstrip the supermajor’s 2009 purchase of XTO Energy for $41bn — its biggest since the Mobil deal — a bet on natural gas that it later conceded had been ill-timed. Exxon has a market capitalisation of $436bn.

Peter McNally, analyst at Third Bridge, said a deal with Pioneer probably made sense for Exxon, which has invested billions in its downstream businesses along the US Gulf coast.   

“Given that their upstream volumes have slowed in the Permian Basin, it’s probably more efficient to acquire the volumes from someone like a Pioneer to feed the oil and natural gas to the refineries, chemical crackers, etc instead of ramping up their rig count and get the volume growth that way,” he said.

Both Exxon and Pioneer reported record profits in 2022 — of $56bn and $8bn respectively — after Russia’s full-scale invasion of Ukraine sent oil and gas prices surging.