The stock of Exxon Mobil (NYSE: XOM) was the topic of discussion among market participants, as the oil major is reported to be in the final stages of discussions to acquire shale driller Pioneer Natural Resources (PXD) for about $60 billion. The stock of Exxon ended Friday’s trading session at $107.17, down $1.82, or 1.67%, from its prior close.
As per the Wall Street Journal, the deal is valued at $60 billion, indicating a premium of $10 billion over the $50 billion market cap of Irving, Texas-based Pioneer Natural Resources. Notably, ExxonMobil commands a market cap of $436 billion. Following the successful completion of the acquisition, Houston, Texas-based Exxon Mobil would clinch the numero uno position in the opulent US oil basin.
Specifically, citing WSJ, a Bloomberg report stated that the takeover of Pioneer would transform Exxon into the largest oil producer with a yield of roughly 1.20 million barrels per day, surpassing several OPEC countries.
Furthermore, the acquisition, if completed successfully, would be the largest since 1999, when Exxon and Mobil Corp. merged.
The news reports also indicate that the deal between the two largest terrain bearers in the Permian Basin spread across Texas and New Mexico, is poised to reach a successful conclusion shortly. This positive outcome is anticipated due to the presence of only minor outstanding matters that require resolution.
If the deal goes through successfully, Exxon’s repository of high-potential drilling sites will be further expanded. This welcome growth will pave the way for the company to access low-cost, virtually risk-free crude properties for the next three decades, catering to the needs of its extensive refinery network located along the Gulf Coast.
Interestingly, Exxon has been scouting for takeovers in the Permian for several years but has not been successful in getting a lucrative deal on time. When the price of crude oil plummeted during the outbreak of COVID-19, Exxon’s finances bore the brunt. During that period, the company stepped up its allocation of capital to huge international ventures, pushing Exxon to take on additional loans in the billions to distribute dividends to shareholders.
After slashing expenses and reducing spending, Exxon realized a historically high profit of $59 billion last year. In July 2023, Darren Woods, Exxon’s CEO, revealed that the company continues to look for suitable mergers and acquisition deals but would remain choosy.
Notably, Scott Sheffield, founder and CEO of Pioneer, may step down this year. Sheffield, with a career spanning back to the 1970s in the Permian Basin, is widely recognized as a key figure in orchestrating the shale revolution that elevated the United States to a dominant position in the global oil industry.
The acquisition news is expected to turn the stock of ExxonMobil slightly bullish in the days ahead.
The historical price chart indicates that the stock of Exxon is facing resistance at $107. The next major support is anticipated only near 104. Additionally, Exxon’s stock is trading below its 50-day moving average, while the MACD indicator is showing a negative reading. Therefore, we anticipate the stock price of Exxon to remain in a downtrend for the next few trading days.
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