Pioneer Natural Resources pops 10% after Exxon deal report; analysts weigh in
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Pioneer Natural Resources (NYSE:PXD) +9.8% in early trading Friday following The Wall Street Journal's report that Exxon Mobil (NYSE:XOM) is in advanced talks to buy the company in a deal valued at ~$60B; Exxon trades -3%.
For Exxon (XOM), a deal would add valuable acreage near some of its own fields and make it the dominant producer in the Permian Basin; Pioneer (PXD) is the Permian's largest operator at 9% of gross production while Exxon is no. 5 at 6% of gross production.
In Q2, Exxon's (XOM) Permian production totaled ~620K boe/day while Pioneer's (PXD) Permian output averaged 711K boe/day.
Exxon (XOM), which earned a record $55.7B profit in 2022, had accumulated nearly $30B cash at the end of June 30.
The "logic of consolidation in the highly fragmented Permian shale remains compelling," with significant gains from economies of scale, Citi analyst Alastari Symes said of the deal.
"We suspect Exxon will fund the deal with mostly equity given the elevated cost of debt, which appears to be above Exxon's dividend yield," TD Cowen analysts said.
The price is right, according to Spencer Jakob at The Wall Street Journal's Heard On The Street, who calculates the reported $60B price plus net debt means Exxon (XOM) would pay only ~6.5x EBITDA that analysts polled by FactSet expect Pioneer (PXD) will generate over the next 12 months.
Goldman analysts note Exxon's (XOM) current leadership has been clear that it wants "top of the pack" positions in the areas where it chooses to operate, and the company has been "sub-scale" in the depth of its Lower 48 inventory.
Pioneer (PXD) shares are down so far this year despite the company's strong performance in the field, improving well productivity and meaningful cash return to shareholders, J.P. Morgan said.
While most energy stocks trade lower, Permian producers speculated as potential takeover targets are up, including Permian Resources (PR) +3.6%, Diamondback Energy (FANG) +2.8%, Coterra Energy (CTRA) +1.8%, Occidental Petroleum (OXY) +1.6%, Devon Energy (DVN) +0.4%.

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