A mega takeover that had been in the offing for a week was finally completed in the oil industry on Wednesday: the American company Exxon Mobil is buying its competitor Pioneer Natural Resources; the purchase price is 59.5 billion dollars (56.2 billion euros), according to Exxon. ).
The takeover is Exxon’s biggest ever this year and its biggest deal since 1998, when the oil giant absorbed Mobil for $81 billion.
There will be no money flowing in a billion dollar deal
There will be no cash involved in the purchase; Pioneer shareholders will receive Exxon shares instead. The oil giant is offering $253 per Pioneer share, which closed Tuesday at $237.41. They were up about 11 percent since the Wall Street Journal first reported the planned deal last Thursday.
Exxon is expanding its presence in a lucrative region
With the purchase, the largest oil producer in the US expands its presence in one of the most lucrative regions of the US oil sector. Pioneer is the third-largest oil producer in the Permian Basin, behind Chevron and ConocoPhillips. There are enormous amounts of shale oil there, which is extracted using the controversial fracking method. The area includes parts of the states of Texas and New Mexico and is the most sought-after region for the U.S. energy industry due to the relatively low cost of oil and gas production.
Over the past two years, Exxon has fought its way out of the loss zone and paid off a large debt pile by cutting costs, selling off numerous assets and buoyed by high energy prices. CEO Darren Woods had blocked demands from investors and politicians to follow the path of European oil companies and rely on renewable energy sources. Despite strong criticism, he continued to stick to a strategy heavily dependent on oil. This paid off: last year Exxon made a record profit of $56 billion. Analysts say the company has set aside about $30 billion to prepare for acquisitions.
According to antitrust experts, Exxon and Pioneer have a good chance of completing the acquisition – despite possible strict scrutiny. You could argue that together they cover only a small part of the enormous global oil and gas market.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
