In a staggering deal that has been rumored since last spring, Exxon Mobil Corp. (NYSE: XOM) announced it is purchasing oil shale giant Pioneer Natural Resources Inc. (NYSE: PXD) for $59.5 billion in an all-stock purchase. The deal will create the largest U.S. oilfield producer and will guarantee a decade of low-cost production.

The Deal

For Exxon, this will be the largest acquisition since it purchased Mobil back in 1999 for $81 billion. It will merge the largest and most powerful energy leader with one of the giants of the shale revolution that put U.S. production back on the map over the past 15 years. (See which 20 American companies have the worst reputations.)

The all-stock acquisition at $253 per Pioneer share represents a small premium to the current trading price near $240. Exxon stock traded down about 3% on Wednesday.

Reuters has reported that the deal is expected to close in early 2024 and will leave four of the largest U.S. oil companies in control of the oil- and gas-rich Permian Basin. Antitrust experts feel that the massive deal has a good chance of being approved, but the scrutiny will be very intense.

The Reaction

Analysts at RBC Capital Markets noted that Pioneer is the largest operator in the Permian, with 9% of the total production. Exxon is the fifth largest in the region, with 6%. Exxon announced that its production volume in the Permian Basin would more than double to 1.3 million barrels per day once the transaction closes.

“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,” Exxon Mobil CEO Darren Woods said in a statement.

Pioneer shareholders will receive 2.3234 shares of Exxon for every share of Pioneer that they own. Shares of both companies have trailed the S&P 500 gains this year. Pioneer is up under 4% and Exxon is only modestly higher on the year.

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