Shares of Pioneer Natural Resources Co. and of several peers focusing on West Texas’s Permian basin rallied Friday after a report that oil giant Exxon Mobil Corp. has its eyes on Pioneer, one of the largest exploration and production companies in the area.
Citi analyst Alastair Symes said that the “logic of consolidation in the highly fragmented Permian shale remains compelling,” with significant gains from economies of scale.“This particular combination would create the largest Permian player and, even with a modest deal premium, we estimate can generate a positive return on investment,” Symes said.
Exxon, for its turn, has invested around $28 billion in its downstream operations over the past decade, and its refineries, petrochemical plants, and liquified natural gas export facilities “all need to be fed with hydrocarbons and adding Pioneer Natural Resources at this point in Exxon’s history would offer both speed and scale,” Third Bridge analyst Peter McNally said.
Pioneer shares have lagged oil-futures prices, and trading at a discount. Chief Executive and founder Scott Sheffield is set to retire at year-end, and a deal would be “a fitting way to conclude his tenure in what appears to be a shareholder friendly manner.”
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