ExxonMobil has acquired Pioneer Natural Resources in an all-stock transition valued at $59.5 billion, or $253 per share, in a deal that gives ExxonMobil a significantly greater stake in the United States energy sector, as the companies say it will also help positively impact sustainability initiatives.
According to ExxonMobil, the acquisition will allow for better returns, more efficiency, and a lower environmental impact by combining Pioneer’s inventory and basin knowledge with Exxon’s technologies, financial resources, and project development capabilities.
The merger, reportedly the largest mergers and acquisitions deal of the year, gives ExxonMobil greater control of the Permian basin. The agreement combines Pioneer’s 850,000 net acres in the Midland Basin with ExxonMobil’s 570,000 acres in the Delaware and Midland Basins, amounting to about 16 billion barrels of oil available in the Permian. This will double ExxonMobil’s Permian production volume to 1.3 million barrels of oil each day, based on 2023 volumes.
“Pioneer is a clear leader in the Permian with a unique asset base and people with deep industry knowledge," said Darren Woods, chairman and CEO of ExxonMobil. "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.”
Pioneer shareholders will receive 2,324 shares of ExxonMobil for each Pioneer share at closing, making the implied total value of the transaction about $64.5 billion.
As a part of the merger, ExxonMobil plans to accelerate Pioneer’s greenhouse gas reduction plans by 15 years, creating a net zero Scope 1 and 2 emissions target of 2035. Pioneer’s adjoining acreage will reportedly allow ExxonMobil to drill long laterals, or the horizontal portions of the well, which may result in fewer wells and a smaller overall surface footprint.
ExxonMobil also plans to use its technologies to monitor and lower methane emissions, highly potent emissions over 25 times more damaging than carbon emissions, from Permian operations. Finally, the company has set targets to increase the use of recycled water used in Permian fracturing operations by 90% by 2030.
“Pioneer’s tier-one acreage is highly contiguous, allowing for greater opportunities to deploy our technologies, delivering operating and capital efficiency as well as significantly increasing production,” said Woods. “Importantly, as we look to combine our companies, we bring together environmental best practices that will lower our environmental footprint and plan to accelerate Pioneer’s net-zero plan from 2050 to 2035."
Oil and gas operations account for about 15% of global energy-related emissions, and according to the International Energy Agency, emissions intensity of oil and gas operations must fall by 50% by the end of the decade. The IEA projects that $600 billion in upfront investment would be needed to reach this goal, a fraction of oil and gas producers' income from 2022.
According to ExxonMobil's recent Global Outlook report, oil and gas will still be needed for heavy industry, even in the case of widespread electric vehicle adoption. The report projects oil and gas will still make up half of the world's energy supply in 2050 based on current trends. Nonetheless, the industry will reportedly need to find additional avenues for lowering operational emissions in order to meet global targets. The report recommends scaling up carbon capture technologies along with the use of hydrogen fuels and biofuels in order to lower emissions.
ExxonMobil's net-zero goals should contribute to lowering oil and gas-related operational emissions in the years to come, especially as the company becomes increasingly prominent in the industry overall.
