Another Mega-Merger, But ExxonMobil Plus Pioneer Will Be The Influence-Shaper For Oil And Climate

Originally published on Forbes.com on October 10, 2023

The Permian basin may become a blueprint for a high-performance supply chain from upstream drilling to LNG and petrochemical products.

Chevron just announced they will buy Hess Corporation for $65 billion, the second mega-merger in two weeks. These represent a step change in the oil industry, with long-term ramifications. ExxonMobil has recently acquired Pioneer Natural Resources for about $60 billion, the biggest since Exxon merged with Mobil in 1999. This makes it the largest international oil and gas company, barring Saudi Aramco.

The merged company will have the largest oil and gas production in the Permian basin, one of the world’s premier oilfields, and about 11% of the total basin production. The Permian basin is close to the Gulf Coast where methane is converted to LNG (liquefied natural gas) and has entered its own golden age for marketing overseas – a clear winner for ExxonMobil+Pioneer.

This combination of factors is like a perfect storm in the history of modern oil and gas. But the new company’s influence won’t stop there – it also extends into climate change. As just one element of this, ExxonMobil has announced they will reach net-zero emissions in the Permian by 2030, only 7 years away. Other elements are even more significant (more on this later). All these add up to a gargantuan company with enormous influence in the future of not only oil and gas but also climate change. Let’s drill deeper into this unique situation.

Influence in the oilfield.

The market cap (number of shares times share price) is shown in Figure 1. The estimated value of ExxonMobil+Pioneer is $411 billion. This is 70% higher than Chevron, and roughly 41% higher than Chevron+Hess. And more than twice as high as other oil and gas majors.  ExxonMobil+Pioneer has become a giant in the oil and gas space. But still far behind the world’s largest companies like Apple ($2.7 trillion) and Microsoft ($2.3 trillion).

With the acquisition of Pioneer, Exxon plans to deploy its fine-tuned Delaware Basin drilling strategy into the heart of the Midland Basin, where the bulk of Pioneer’s leases lie. This includes an eye-catching design where horizontal wells that are 4 miles long are arranged in a cubic array.

How much production was added? ExxonMobil is producing 620,000 barrels of oil-equivalent per day (boepd), and Pioneer brings in 711,000 boepd making a total of 1.33 MMboepd. This is 11 % of the entire Permian basin of about 12 MMboepd. ExxonMobil+Pioneer will be the largest shale oil producer in the world, bypassing Chevron.

By 2027, ExxonMobil+Pioneer could be producing 2 MMboepd which would be 45% of the company’s output and would be a substantial increase from 1.33 MMboepd now. The total combined Permian reserves are estimated at 16 billion boe, which implies 15-20 years of drilling inventory.  

The almost ideal juxtaposition of leases between Exxon Mobil and Pioneer gives ExxonMobil+Pioneer a total of 1.4 million acres. Other behemoth leaseholders in the Permian include Occidental with 2.9 million, Chevron with 2.2 million, and ConocoPhillips with over 1 million acres.

The new resource base of 16 billion boe will provide everything¹ the new company needs for an enviable high-level operations and marketing enterprise, integrated from upstream to midstream to downstream refining and petrochemicals to exports of LNG in its golden age. 

The influence of ExxonMobil+Pioneer on climate and the energy transition is enormous, and this analysis will follow in a separate article.

References.

1. Wood-McKenzie Press note, ExxonMobil acquisition of Pioneer Natural Resources creates world’s first Megamajor.

Takeaways.

In the Permian basin, ExxonMobil is producing 620,000 barrels of oil equivalent per day (boepd), and Pioneer brings in 711,000 boepd making a total of 1.33 MMboepd. This is 11 % of the entire Permian basin of about 12 MMboepd.

The new resource base of 16 billion boe, which implies 15-20 years of drilling inventory, will provide everything the new company needs for an enviable high-level operations and marketing enterprise. 

With its ambitious commitments to reduce emissions, the Permian may become a blueprint for a high-performance supply chain from upstream drilling to LNG and petrochemical products. ExxonMobil+Pioneer influence will be invaluable to other oil and gas companies.