Exxon Mobil’s $59.5 bn Acquisition of Pioneer Natural Resource

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Top Highlights

• The acquisition will combine Pioneer's substantial land holdings, entrepreneurial culture, and extensive industry knowledge with Exxon Mobil's strong financials, cutting-edge technologies, and industry-leading capabilities in project development

• anticipated to yield significant double-digit returns by efficiently utilising more resources while also minimising environmental impact.

• acreage

• with a focus on retaining most employees through cross-training, coordination among leaders, and preservation of operational roles throughout the transition.

• accretive

• potentially resulting in around $2 billion in "merger synergies" for Exxon

• the one-time deal costs.

• As a result, the deal is expected to have an immediate positive impact on Exxon's earnings per share (EPS) and free cash flow.

• Exxon is acquiring Pioneer's resources at a cost below $35 per barrel,

• despite the acquisition's price tag exceeding $60 billion.

• his long term vision to increase free cash flow is also coupled with the fact that Pioneer’s acreage in the Midland Basin is one of U.S.’s largest untapped fields, thus providing mid to long term accretion for Exxon’s EPS and FCF.

• Exxon in the long term also benefits from Permian’s accelerated plan of reducing greenhouse gas emissions to net zero by 2035. This eases political pressures faced by Exxon throughout the energy transition, and provides ample opportunities for Exxon to integrate their ‘aggressive’ fugitive methane detection techniques.

• n terms of growth, the merger provides a substantial revenue boost, potentially bringing Exxon's sales 37% above pre-pandemic levels. The combined power after the merger could produce 2 million barrels a day in the Permian by 2027, which represents almost 2% of the total global oil supply.

• Its forward P/E ratio is slightly above the industry average but well below the S&P 500's.

• are also set to dip in the near term

• macroeconomic and ESG risk

• This is most likely to be short lived and a near term benefit which is unlikely to translate into material synergies that will be beneficial to shareholders.

• Governments around the world have made pledges to net zero targets and if enforced, could lead to oil demand halving by 2050

• dilutive.

• Another key metric to look at is the declining rig activity which may suggest the start of a decline in the overall oil and gas production