Exxon pushes deeper into top US oilfield with $60 billion deal for Pioneer

(Reuters) – Exxon Mobil (NYSE:) has agreed to buy U.S. rival Pioneer Natural Resources (NYSE:) in an all-stock deal valued at $59.5 billion that would make it the biggest producer in the Permian Basin.

Following are the reactions from Wall Street analysts to the deal:

TOM ELLACOTT, SENIOR VICE PRESIDENT, CORPORATE RESEARCH, WOOD MACKENZIE

“It’s a massive oil deal that demonstrates ExxonMobil’s bullishness on longish-term oil demand and prices . . . It is also a deal done from a position of strength for ExxonMobil – a deal of choice rather than of necessity.”

“The acquisition of an elite oil-tilted opportunity will increase what is already easily the most oil-weighted portfolio in the peer group – at a time when some peers are shifting their portfolios to gas. Bulking up materially in oil and gas also adds to the challenges of pivoting to low-carbon, especially if the energy transition accelerates.”

RBC CAPITAL MARKETS ANALYSTS

“We do not anticipate other buyers to compete with XOM given the size of the transaction and likelihood that investors would eschew that action. An FTC review is quite possible but the market share of this combination appears to be under thresholds typically warranting action.”

“We would expect some investors to question whether CVX may be propelled to make a sizeable acquisition following XOM, however we would note that the management track record is to be patient (with recent deals done at lower points in the cycle), while this deal effectively removes the main competition for CVX on large-scale M&A.”

GABRIELE SORBARA, MANAGING DIRECTOR – EQUITY RESEARCH, SIEBERT WILLIAMS SHANK & CO

“We do not expect a competing bid, as this combination was likely in the works for a while and fits perfectly for XOM, in turn driving up the PXD share price further, as the deal is tied to XOM share price in an all-stock transaction. In our view, the deal should ultimately close, despite some FTC scrutiny.”

JEFF LEBLANC, EQUITY ANALYST, TUDOR, PICKERING, HOLT & CO

“While we believe XOM already held the most attractive global upstream portfolio in the space longer-term, we believe this deal further cements that characterization given our highly favorable view of the PXD assets that we believe will provide XOM with best-in-class short-cycle investment flexibility. “

RYAN TODD, ANALYST, PIPER SANDLER & CO

Deal will only increase relative advantage, adding incremental pressure on peers, in particular Chevron (NYSE:), which has struggled with lingering investor concerns regarding portfolio depth.

Expect increasing investor focus on future potential consolidation activity, from SMID-caps up to and including names like Occidental Petroleum (NYSE:), BP (NYSE:) and ConocoPhillips (NYSE:).

DAVID DECKELBAUM, ANALYST, TD COWEN

“The all equity component will likely present an arbitrage scenario until closing and while the investor base is quite different, we would not anticipate a push for a cash component or higher premium.”

“The deal is almost entirely upstream and while FTC approval will be necessary, the combined entity represents ~10% of total Permian oil production, levels that should prove quite acceptable.”