Exxon Acquires Pioneer Natural Resources for $59.9 Billion in Biggest Deal Since Mobil Merger
Key Takeaways
- Exxon Mobil is purchasing major energy producer Pioneer Natural Resources for $59.9 billion
- The deal is the biggest acquisition since Exxon’s 1999 purchase of Mobil which came with a price tag of $75 billion
- It’s a major bet on the policy future for fossil fuels, flying in the face of the trend for greater moves towards sustainability
Oil giant Exxon Mobil is flying in the face of the push for greener and more renewable energy, making a massive bet on the future of fossil fuels. They have this week reached an agreement to buy Pioneer Natural Resources, strengthening their foothold in Texas and allowing them greater expansion into Guyana.
The deal will see the company pay almost $60 billion, which is by far their biggest deal since Exxon bought Mobil for $75 billion back in 1999.
Now the purchase itself is one thing, but more interesting is the fact that Exxon Mobil, one of the world’s biggest companies and valued at half a trillion dollars, is prepared to make such a massive bet when so much recent focus has been reducing reliance on fossil fuels.
It appears that they’re concerned about any real legislative change to come, so should investors be following their lead?
The Exxon Mobil and Pioneer deal
This move sees Exxon making moves to build up their resources in the US and its neighbors. It stands in contrast to their strategy in recent years, which has seen them expand and upgrade operations all across the globe.
But this isn’t just a case of making it an easy commute for executives who might want to visit the sites. It’s a clear sign that the company feels more confidence in the US government policy when it comes to fossil fuels than it does in other places in the world.
And while this is a move that will massively expand Exxon Mobil’s oil production capabilities, they will also be using the acquisition to implement more ‘green’ strategies. Specifically, they’ll be boosting their plans to create new carbon capture plants, which take carbon dioxide from industrial manufacturing and transfer it underground via pipelines.
How did Exxon Mobil’s stock price react?
The stock fell from the $109.64 Tuesday’s close to hit an intraday low of $105.02 on Wednesday, but recovered back to finish the day at $106.47.
It’s been a mixed experience for shareholders in Exxon over the past few years. Oil stocks were hit incredibly hard at the beginning of the pandemic as global transport all but shutdown. Exxon’s stock fell from around $70 pre-pandemic to hit under $33 in March 2020.
Volatility has persisted, but the stock has marched up slowly since then. Over the past year the stock is up 8.19%, but it’s flat year to date at +0.02%.
The bottom line
Exxon Mobil’s major purchase of Pioneer gives investors a lot to think about. Exxon obviously believes that the push towards renewable energy isn’t a major threat, and that an investment of almost $60 billion represents a good strategic decision.
On the other hand, a vast amount of resources is going towards improvements in sustainability and increasing uptake of technology such as electric cars. While these two sectors will continue to operate in relative harmony for the short term, at some point one side of the argument will begin to get the upper hand.
Investment returns are likely to follow that trend.
