NorthAmOil: Exxon to acquire Pioneer for $60bn

Exxon has also not made such a large purchase since its $81bn merger with Mobil Corp. in 1999. It is also the world’s largest take-over so far this year.

The deal could start a trend of mergers and acquisitions in US shale as rivals such as Chevron try and ConocoPhillips to catch up, said analysts. The Permian has been relatively fragmented, and much dominated by smaller producers, who may now seek to grow so they can better compete with large players.

Big Oil sat out the start of the shale oil boom, sceptical, but has now seen the results that low-cost fast drilling can produce. In 2019 the Permian became the most prolific basin in the world, at 4.1mn barrels per day of oil in March of that year, compared with the Ghawar field in Saudi Arabia’s 3.8 mn bpd.

Pioneer – a pure-play company – is the Permian’s largest well operator, accounting for 9% of the play’s gross production, while Exxon is in fifth place with 6%, said RBC Capital Markets.

Pioneer's production costs average a low $10.50 per barrel, said Reuters. The company estimates that its drilling inventory in the Permian could last more than two decades at its current rate of drilling. Of course, that pace may now change.

The Exxon-Pioneer acquisition, which must be approved by regulators, is expected to close in the first half of 2024. Exxon will pay $253 per share, said a company press release.

"The market share of this combination appears to be under thresholds typically warranting [anti-trust] action," said RBC Capital Markets analyst Scott Hanold in a note.

Exxon would become by far the largest player in the Permian, which straddles west Texas and New Mexico. Its production volume in the region would more than double to 1.3mn barrels of oil equivalent per day (boepd), assuming that the acquisition is completed.

It would bring the company’s total production to nearly 4.5mn boepd – 50% more than the next biggest supermajor, said Bloomberg.