11 September 2023
If you are covering the news that ExxonMobil has agreed to buy shale producer Pioneer for $60bn, please find below a comment from Jamie Maddock, equity research analyst at Quilter Cheviot:
“Confirmation of Exxon’s recently rumoured deal to buy Pioneer builds on Exxon’s existing US onshore energy capabilities. Given Pioneer’s enviable US onshore acreage, this adds significant scale to Exxon’s existing short-cycle oil production, meaning investments can be repaid quicker and profits can be derived at a much faster rate.
“The US government will be particularly pleased to see this deal. Ever since the energy shock experienced following Russia’s invasion of Ukraine, governments have been turning to domestic energy production to secure supply and remove reliance on external states. This deal keeps a significant US player effectively in US hands.
“This is a large and significant deal in terms of the numbers involved, but it is important to note that this is an all share transaction, so the risk is shared with Pioneer shareholders while they retain the upside exposure as well. Furthermore, the valuation doesn’t look expensive, when you look at future earnings potential.
“This deal could spark further consolidation in the sector, particularly due to the difference in valuation that exists between the US and Europe oil producers or smaller US onshore shale producers. With the companies looking relatively cheap, this could just be the catalyst the market needed to start the wave of consolidation and potentially make it more efficient in the process.”
