Pioneer shares jump in premarket trading on merger talks with Exxon

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A deal would be Exxon’s biggest acquisition since its $81-billion deal for Mobil in 1998 and could solidify the oil major’s position in the lucrative Permian basin

.If the negotiations conclude successfully, an agreement between Exxon and Pioneer could be reached in the coming days, Reuters reported, citing three sources.

Pioneer has a market value of $50-billion and is one of the biggest producers in the Permian basin, which stretches across parts of Texas and New Mexico and is known for its relatively low cost to extract oil and gas. “Any deal for Pioneer will be closely scrutinized by investors looking for a substantial premium, a reality that has not existed most recently in explorer and producer M&A,” said TD Cowen analysts in a note.“Pioneer is the Permian’s largest operator at 9 per cent of gross production while Exxon is No. 5 at 6 per cent. Combined amounts to 15 per cent of operated Permian production, but only 6 per cent of total US production.

“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.Market data values update automatically. Checking box will enable automatic data updates.

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