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Will ExxonMobil's $60B Pioneer Megadeal Spur Permian M&A?
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Supermajor ExxonMobil's (XOM - Free Report) buyout of shale biggie Pioneer Natural Resources (PXD - Free Report) for $60 billion has sparked investor interest in the Oil/Energy sector. The all-stock transaction, which values Pioneer shares at $253 apiece, is the largest global acquisition of the year. It's part of a broader trend of mergers and acquisitions focusing on the Permian Basin, a key area for the oil and gas industry.
ExxonMobil Snaps Up Pioneer
The acquisition would strengthen ExxonMobil's presence in the Permian Basin, aligning with its growth strategy. Both companies are major landholders in this region, which extends across Texas and New Mexico. The deal’s closure by the first half of next year would solidify ExxonMobil's position as a dominant producer in the Permian Basin.
Investors will be watching this acquisition closely, as it could signal a new wave of consolidation in the energy sector. As ExxonMobil aims to expand its footprint in this prolific oil field, other companies may explore similar moves, potentially reshaping the industry's competitive landscape. This situation emphasizes the ongoing significance of the Permian Basin in the energy sector's growth plans.
The Permian ‘Super’ Basin
The Permian Basin Shale, located beneath parts of Texas and New Mexico, covers a vast area of 75,000 square miles, nearly half the size of California. It's considered an economically sound region for drilling and completing oil wells, with well returns in certain areas among the best in the United States. This economic advantage allows producers to operate profitably, as the average breakeven prices in most of the Permian well locations are below $50 per barrel, the lowest in the United States.
Oil giants like ExxonMobil and Chevron have recognized the potential of this unconventional basin and are making it a focal point for their future production. According to the U.S. Energy Information Administration (EIA), in October, oil production in the Permian Basin is expected to reach nearly 5.8 million barrels per day, representing over 60% of the output from the seven major shale basins in the United States.
With an estimated 60-70 billion barrels of recoverable crude, the Permian Basin remains a dominant force in onshore oil production, poised for sustained growth and economic viability for years. Its significance in the energy sector is undeniable, and it continues to attract attention from major industry players.
Some Major Permian Acreage Holders
Time will tell if ExxonMobil’s takeover of PXD could unleash a major wave of M&A activity in the oil industry. Meanwhile, let’s look at some other independent upstream firms with a Permian focus as investors speculate on the next potential targets.
Diamondback Energy (FANG - Free Report) : Founded in 2007, Midland, TX-headquartered Diamondback Energy is an independent oil and gas exploration & production company with its primary focus on the Permian Basin, where it has around 491,000 net acres. The Zacks Rank #3 (Hold) company’s activities are concentrated in the Wolfcamp, Spraberry and Bone Spring formations.
At the end of 2022, Diamondback held around 2,033 million barrels of oil equivalent in proved reserves (53% oil, 69% proved developed). FANG’s average daily output totaled 386 thousand barrels of oil equivalent per day in 2022, of which almost 58% was oil.
Permian Resources (PR - Free Report) : A pure-play Permian Basin operator, the company’s operations are focused in the core of the Delaware Basin. Further, it is in the process of acquiring smaller rival Earthstone Resources by the end of this year.
The acquisition will expand Permian Resources' existing footprint by adding 223,000 net acres in the Permian Basin. This will take the combined company to more than 400,000 net acres with pro-forma production of 300,000 barrels of oil equivalent per day.
Coterra Energy (CTRA - Free Report) : Coterra Energy is an independent upstream operator focused on the Permian Basin, Marcellus Shale and Anadarko Basin. The company reached its current form following the October 2021 merger between Cabot Oil & Gas Corporation and Cimarex Energy Co.
In the Permian Basin, Coterra’s position consists of approximately 307,000 net acres, primarily targeting the Upper Wolfcamp and Bone Spring formations. Last year, the company’s average daily production from the Permian basin totaled 211 thousand barrels of oil equivalent (Mboe). Of this, 66% was liquids, while the remaining 34% was natural gas.
Looking Ahead
As energy companies seek expansion and cost-effectiveness while dealing with investor demands for value creation and higher returns, consolidation is emerging as a key strategy to satisfy shareholders. Smaller players in the industry, faced with challenges accessing capital, both in debt and equity, are looking to willing buyers to boost their growth plans. Larger entities, on the other hand, benefit from a lower cost of capital, presenting substantial development opportunities.
This consolidation trend is particularly evident in the Permian Basin, situated in West Texas and New Mexico, which was a prominent U.S. shale play prior to the pandemic's onset. Recent years have witnessed numerous deals reinforcing the belief that assets in this region continue to be attractive investment opportunities.
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Will ExxonMobil's $60B Pioneer Megadeal Spur Permian M&A?
Supermajor ExxonMobil's (XOM - Free Report) buyout of shale biggie Pioneer Natural Resources (PXD - Free Report) for $60 billion has sparked investor interest in the Oil/Energy sector. The all-stock transaction, which values Pioneer shares at $253 apiece, is the largest global acquisition of the year. It's part of a broader trend of mergers and acquisitions focusing on the Permian Basin, a key area for the oil and gas industry.
ExxonMobil Snaps Up Pioneer
The acquisition would strengthen ExxonMobil's presence in the Permian Basin, aligning with its growth strategy. Both companies are major landholders in this region, which extends across Texas and New Mexico. The deal’s closure by the first half of next year would solidify ExxonMobil's position as a dominant producer in the Permian Basin.
Investors will be watching this acquisition closely, as it could signal a new wave of consolidation in the energy sector. As ExxonMobil aims to expand its footprint in this prolific oil field, other companies may explore similar moves, potentially reshaping the industry's competitive landscape. This situation emphasizes the ongoing significance of the Permian Basin in the energy sector's growth plans.
The Permian ‘Super’ Basin
The Permian Basin Shale, located beneath parts of Texas and New Mexico, covers a vast area of 75,000 square miles, nearly half the size of California. It's considered an economically sound region for drilling and completing oil wells, with well returns in certain areas among the best in the United States. This economic advantage allows producers to operate profitably, as the average breakeven prices in most of the Permian well locations are below $50 per barrel, the lowest in the United States.
Oil giants like ExxonMobil and Chevron have recognized the potential of this unconventional basin and are making it a focal point for their future production. According to the U.S. Energy Information Administration (EIA), in October, oil production in the Permian Basin is expected to reach nearly 5.8 million barrels per day, representing over 60% of the output from the seven major shale basins in the United States.
With an estimated 60-70 billion barrels of recoverable crude, the Permian Basin remains a dominant force in onshore oil production, poised for sustained growth and economic viability for years. Its significance in the energy sector is undeniable, and it continues to attract attention from major industry players.
Some Major Permian Acreage Holders
Time will tell if ExxonMobil’s takeover of PXD could unleash a major wave of M&A activity in the oil industry. Meanwhile, let’s look at some other independent upstream firms with a Permian focus as investors speculate on the next potential targets.
Diamondback Energy (FANG - Free Report) : Founded in 2007, Midland, TX-headquartered Diamondback Energy is an independent oil and gas exploration & production company with its primary focus on the Permian Basin, where it has around 491,000 net acres. The Zacks Rank #3 (Hold) company’s activities are concentrated in the Wolfcamp, Spraberry and Bone Spring formations.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
At the end of 2022, Diamondback held around 2,033 million barrels of oil equivalent in proved reserves (53% oil, 69% proved developed). FANG’s average daily output totaled 386 thousand barrels of oil equivalent per day in 2022, of which almost 58% was oil.
Permian Resources (PR - Free Report) : A pure-play Permian Basin operator, the company’s operations are focused in the core of the Delaware Basin. Further, it is in the process of acquiring smaller rival Earthstone Resources by the end of this year.
The acquisition will expand Permian Resources' existing footprint by adding 223,000 net acres in the Permian Basin. This will take the combined company to more than 400,000 net acres with pro-forma production of 300,000 barrels of oil equivalent per day.
Coterra Energy (CTRA - Free Report) : Coterra Energy is an independent upstream operator focused on the Permian Basin, Marcellus Shale and Anadarko Basin. The company reached its current form following the October 2021 merger between Cabot Oil & Gas Corporation and Cimarex Energy Co.
In the Permian Basin, Coterra’s position consists of approximately 307,000 net acres, primarily targeting the Upper Wolfcamp and Bone Spring formations. Last year, the company’s average daily production from the Permian basin totaled 211 thousand barrels of oil equivalent (Mboe). Of this, 66% was liquids, while the remaining 34% was natural gas.
Looking Ahead
As energy companies seek expansion and cost-effectiveness while dealing with investor demands for value creation and higher returns, consolidation is emerging as a key strategy to satisfy shareholders. Smaller players in the industry, faced with challenges accessing capital, both in debt and equity, are looking to willing buyers to boost their growth plans. Larger entities, on the other hand, benefit from a lower cost of capital, presenting substantial development opportunities.
This consolidation trend is particularly evident in the Permian Basin, situated in West Texas and New Mexico, which was a prominent U.S. shale play prior to the pandemic's onset. Recent years have witnessed numerous deals reinforcing the belief that assets in this region continue to be attractive investment opportunities.