What happened
Shares of Pioneer Natural Resources (PXD -2.28%) were trading 10% higher as of noon Friday on reports that ExxonMobil (XOM -2.78%) is about to acquire the oil and gas producer in a megabillion-dollar deal.
So what
Oil and gas giant ExxonMobil is reportedly closing on a $60 billion deal to acquire Pioneer Natural, according to The Wall Street Journal. The newspaper stated that a deal could be closed in the coming days, although it also cautioned that nothing is finalized yet.
The Wall Street Journal first reported a potential deal in April this year when it said the two oil companies were in preliminary talks to merge.
Now what
If the deal goes through, it will be one of the biggest takeovers for ExxonMobil. It will give it massive headway into the Permian Basin since Pioneer Natural is a pure play in the liquids-rich Midland Basin.
In fact, Pioneer Natural has a massive acreage in the Permian Basin and is the largest producer in terms of gross production. The company also boasts low margins and a solid cash-flow profile. It expects to generate nearly $13 billion in cumulative free cash flow over the next five years, even if West Texas Intermediate (WTI) crude oil prices average only $60 per barrel.
ExxonMobil, meanwhile, has focused extensively on the Permian Basin in recent years. By 2027, the oil major expects to double its earnings and cash-flow potential, with Permian expected to be an important contributor to that growth.
If it acquires Pioneer Natural, ExxonMobil will become the largest player in the Permian. ExxonMobil had nearly $30 billion in cash as of June 30.
