13 Oct - Commercial Awareness - Energy
Topic: ExxonMobil’s £60 billion acquisition of Pioneer Natural Resources
https://www.ft.com/content/f389210f-ea4d-492d-b562-62aadd6ddc42
https://www.ft.com/content/60295c70-a6a8-4e72-8597-4ce75d5b7c40
Exxon’s CEO’s longstanding belief – oil and gas will remain central to global energy supply. The company anticipates oil and gas to make up half of global energy demand and the temperature rises set out in Paris Agreement is likely to fail.
What’s Permian Basin?
A sedimentary basin in Southwest America. It is the highest-producing oil field in the US, producing an average of 4.2 million barrels of crude oil per day. Located between Texas and Mexico.
What good does it do for Exxon?
Pioneer will double the production to 1.3mn barrels per day, driving the basin’s output to 2mn b/d by 2027, access to 16bn barrels with 15-20 years of inventory.
Pioneer’s oil field is adjacent to Exxon with considerable overlapping, which enabled it to drill wells horizontally, achieving efficiency and cut costs to below $35/b – a fraction of current Texas price $83/b
Investors pressurise oil and gas companies to give up on costly drilling programs, instead, pursue acquisition.
Competitors?
BP and Shell have cut their fossil fuel portfolio and oil output since 2019. Chevron spent $6.3bn to acquire shale producer PDC Energy, adding new oil and gas reserves. It is speculated that they will pursue an M&A to compete with Exxon.
Shares in Permian-focused companies such as Diamondback, Permian Resources, Matador jumped on the speculation that they may be acquisition targets.
