The firms jointly announced on Wednesday ExxonMobil will acquire Pioneer, a major producer in the Permian, in an all-stock transaction valued at $59.5 billion expected to close in the first half of 2024. The deal more than doubles ExxonMobil’s Permian footprint and increases lower-cost-of-supply production.
The combined company will have an estimated 16 billion barrels of oil equivalent resource in the Permian, according to a statement from ExxonMobil. ExxonMobil’s Permian production volume would more than double to 1.3 million barrels of oil equivalent per day (MOEBD) at the close of the transaction, based on 2023 volumes, and is expected to increase to approximately 2 MOEBD in 2027.
“For midstream, it tends to be beneficial to have a large customer with a strong credit rating like Exxon. The expectation for greater production growth post-merger than Pioneer would have provided on its own is also positive for midstream Permian operators,” Stacey Morris, head of energy research at VettaFi, said.
ExxonMobil's Growing Permian Footprint
ExxonMobil Corporation and its subsidiaries accounted for 20%, 15%, and 12% of midstream company and Permian player Plains All American’s (PAA/PAGP) revenues for the years ended December 31, 2022, 2021 and 2020, respectively, according to regulatory filings.
Pioneer owns 27.2% interest in the WestTX system, a joint venture with midstream corporation Targa Resources (TRGP). The WestTX system comprises 11 processing plants in the Permian Midland system, as well as approximately 5,100 miles of natural gas gathering pipelines in the Permian.
Shares of Plains and Targa rallied on Wednesday, outpacing the broader midstream space. In midday trading Wednesday, Plains and Targa were up around 2.8% and 2.7%, respectively, while the Alerian Midstream Energy Index (AMNA) climbed nearly 0.9%.
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