FTC Greenlight: XOM Stock will BOOM?
Conditional Approval?
The Federal Trade Commission (FTC) is close to approving $Exxon Mobil(XOM)$ acquisition of $Pioneer Natural Resources(PXD)$ for $60 billion.
The approval is contingent on the condition that Pioneer's founder, Scott Sheffield, will not join Exxon's board.
This decision comes amidst ongoing legal challenges and allegations of collusion among oil producers in the Permian Basin.
What Came to Mind?
Reading the news, I immediately thought: "Could the approval boost ExxonMobil's stock price”?
It's been dropping since their first quarter earnings report came out last Friday morning (26 Apr)."
XOM - Q1 2024 Earnings.
Below is XOM’s first quarter compared to its YoY performance and Wall Street expectations (as surveyed by LSEG):
Earnings per share (EPS): $2.06 vs $2.76 YoY vs $2.20 expected.
Revenue: $83.08 billion vs $86.56 billion YoY vs $78.35 billion expected.
Net Income: $8.22 billion vs $11.43 billion YoY; that is a -28% decline.
In short, both revenue and EPS fared worse YoY. However revenue exceeded Wall Street expectations.
Factors for overall softening:
Lower refining margins and natural gas prices that have plummeted from last year’s highs.
Natural gas prices have plunged -37% in 2024.
Refining margins are lower than a year ago. Exxon’s fuel business saw earnings plummet -67% to $1.38 billion, compared with $4.18 billion YoY, as a result.
Exxon CEO - Mr Darren Woods also attributed earnings miss to (a) noncash tax and (b) inventory adjustments.
Acquisition Benefits.
With a $60 billion price tag on Pioneer Natural Resources, is this a “justifiable” purchase?
According to Exxon Mobil, it is.
When the acquisition news first broke on 30 Oct 2023, the following benefits have been mentioned:
Transforms ExxonMobil’s upstream portfolio, more than doubling the company’s Permian footprint and creating an industry-leading, high-quality, high-return undeveloped U.S. unconventional inventory position
Expect to generate double-digit returns by recovering more resource, more efficiently and with a lower environmental impact
Combines Pioneer’s sizeable acreage, entrepreneurial culture and deep industry expertise with ExxonMobil’s balance-sheet strength, advanced technologies and industry-leading project development capabilities
Plans to accelerate Pioneer’s net zero Permian ambition from 2050 to 2035
Strengthens US economy and energy security.
Exxon Mobil stock price since Q1 earnings report.
On Fri, 26 Apr upon earnings released, stock price fell.
On Mon, 29 Apr with a positive market sentiments, XOM rose.
Only to fall again on Tue 30, Apr as FOMC convenes for its May meeting.
On Wed, 01 May as market reacted “negatively” to Fed chairman’s post FOMC press conference, XOM fell again.
My viewpoints: (mine & mine only)
The acquisition will make Exxon the biggest oil and natural gas producer in the Permian Basin, North America’s largest US oil field.
There “should be” synergy to be reaped, along with the acquisition.
Investors often view successful acquisitions favorably, especially when they enhance a company’s strategic position or growth prospects. Overall, a positive sentiment.
The merger combines Pioneer’s sizable acreage with ExxonMobil’s existing holdings, creating an industry-leading, high-quality, high-return undeveloped U.S. unconventional inventory position.
ExxonMobil’s Permian production volume is expected to more than double, reaching approximately 1.3 million barrels of oil equivalent per day (MOEBD) by 20271.
Leveraging on Pioneer’s contiguous acreage means that XOM could drill long, best-in-class laterals, resulting in fewer wells and a smaller surface footprint.
Hopefully, this capital efficiency will impact the stock price - positively.
ExxonMobil believes the transaction will enhance US energy security by combining technologies, operational excellence, and financial capability.
More importantly, I believed FTC sees the benefits this acquisition brings to the table as well. Hence its impending approval.
Must Read: Click on below titles to access. Give a like & help to Repost ok. Thanks.
Do you think XOM stock price will rise upon FTC approval received?
Do you think such large scale acquisition will become an even rarer sight going forward, making this a definite “good” buy ?
If you find this post interesting, give it wings! ️ Repost and share the insights ?
Do consider “Follow me” and get firsthand read of my daily new post. Thank you.
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.
Pls help to "Re-post". Tks! Rating is important (to me).
Would you consider "Follow me" and get first hand read of my Daily new posts? Thanks!). Tks!
Great Oil 🛢️