It's Official - Exxon Mobil To Acquire Pioneer Natural Resources For $59.5B In Stock

Exxon Mobil Corporation XOM shares are trading lower after it inked a definitive agreement to acquire Pioneer Natural Resources Company PXD in an all-stock transaction valued at $59.5 billion, or $253 per share.

Under the terms of the deal, Pioneer shareholders will receive 2.3234 shares of ExxonMobil for each Pioneer share at closing. 

ExxonMobil perceives the transaction as a conduit for further amplifying U.S. energy security by channeling supreme technologies, operational prowess, and financial capability to a pivotal source of domestic supply, thereby bestowing benefits upon the American economy and its consumers.

The acquisition deal represents 18% premium to Pioneer's undisturbed closing price on October 5 and a 9% premium to its prior 30-day volume-weighted average price on the same day. 

The implied total enterprise value of the transaction, including net debt, is approximately $64.5 billion.

By the end of the Q2, Exxon's cash flow from operations reached $9.4 billion, and free cash flow was $5.0 billion. The company's long-term debt stood at $37.567 billion. 

The transaction is expected to close in the first half of 2024.

"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," said ExxonMobil Chairman and CEO Darren Woods.

The merger melds Pioneer's expansive 850,000+ net acres in the Midland Basin with ExxonMobil's substantial 570,000 net acres across the Delaware and Midland Basins, forging the industry's premier high-caliber undeveloped U.S. unconventional inventory position. 

Unitedly, the entities will boast an estimated 16 billion barrels of oil equivalent resource in the Permian. 

Upon closure, ExxonMobil's Permian production volume is set to double to 1.3 million barrels of oil equivalent per day (MOEBD), based on 2023 volumes, and is projected to increase to approximately 2 MOEBD by 2027.

Leveraging Pioneer's distinctive Permian inventory and basin expertise with ExxonMobil's proprietary technologies, financial prowess, and project development is anticipated to yield double-digit returns by extracting more resources more efficiently and with diminished environmental impact, the companies said in a release.

The deal will amalgamate Pioneer's undeveloped Midland acreage with ExxonMobil's demonstrated Permian resource development approach.

The combination transforms ExxonMobil's upstream portfolio by increasing lower-cost-of-supply production, as well as short-cycle capital flexibility. 

Exxon 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. 

Exxon's strong balance sheet combined with Pioneer's added surplus free cash flow provides an upside opportunity to enhance shareholder capital returns post-closing.

Price Action: XOM shares are trading lower by 4.16% to $105.85 on the last check Wednesday, while PXD shares are trading higher by 0.16% to $237.79.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.