Brief on ExxonMobil's acquisition of PXD
$Exxon Mobil(XOM)$ announced on Wednesday that it has agreed to acquire $Pioneer Natural Resources(PXD)$ in an all-stock transaction valued at $59.5 billion, which is $253 per share based on Exxon's closing price on October 5.
Several key points to note:
1. It's an all-stock deal, not much room for arbitrageurs.
PXD shareholders will receive 2.3234 shares of XOM for each PXD share they own. Therefore, PXD's future fluctuations will be closely tied to XOM's performance. From an arbitrage perspective, as of the closing price on October 11, PXD shares have only a $6.6 premium per share, which is approximately 2.74%, making it a very low premium. However, due to the speculative nature of PXD trading in recent days, there might be selling pressure following the news, potentially widening this discount. Additionally, there's a difference in the options volatility between PXD and XOM, offering opportunities for option arbitrage.
2. Antitrust approval will be challenging and comes with significant risks.
ExxonMobil expects that this transaction will increase production in the Permian Basin to over 1.3 million barrels of oil equivalent per day and reach around 2 million barrels per day by 2027, making ExxonMobil's oil and gas production approximately 4.5 million barrels of oil equivalent per day, surpassing the second-largest international oil and gas company by 50%. This deal is expected to rank fourth in the history of the oil and gas industry, potentially reshaping the market structure of the U.S. oil industry. Therefore, the difficulty of obtaining approval through the U.S. antitrust review is significant. Once approved, it could trigger a wave of industry consolidation.
If the 2024 presidential election results in the Democratic Party being reelected, it's unlikely that President Biden, who previously publicly stated that ExxonMobil "makes more money than God," will easily approve the deal. Conversely, if the Republican Party wins, the probability of approval is much higher, and the deal could become a bet on the election outcome.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
The Pioneer deal will be great for XOM and save money down the road. Oil will continue to remain in the mid $80s to mid $90s range. XOM will trade in the low $100s to $117s.
WOW, I don't usually come on these message boards but I wanted to gauge the PDX reaction by average shareholders. I guess this was a waste of time.
Truist securities upgrade hold to buy. Interesting because Truist has been very negative on the stock and is one of those woke companies that doesn’t like O&G.
Actually its PXD and id think most people that own XOM probably own some of it already.. It was another great energy play :)
I agree they are adding massively to earnings but it could be a quarter or two before we see the full benefits.
Great ariticle, would you like to share it?