The stock market moved higher Wednesday morning, with the Nasdaq Composite (^IXIC 0.71%) leading the way up with gains of about two-thirds of a percent. Despite some readings on inflation at the producer level that were higher than many had expected, investors still seem comfortable that interest rates have just about reached their peak levels. If that's the case, the bullish argument is that any slowing in the economy will be temporary and give way to looser monetary policy in the near future.
Energy stocks have gotten more attention lately, as volatile prices of crude oil worldwide have been a key factor for oil and gas production companies to take into consideration. Consolidation in the industry has been a theme for a while now, and ExxonMobil (XOM +0.64%) did its part by finalizing a deal to acquire Pioneer Natural Resources (PXD +0.00%). Yet a completely different energy stock, Plug Power (PLUG +1.14%), posted bigger stock-price gains than Pioneer.
Here are all the details.
Done deal
Among big oil companies, shares of ExxonMobil moved lower by 4%, while Pioneer Natural Resources saw a gain of around 1%. The news that the companies had reached an agreement on a merger came as no real surprise for most market participants, but the big question in the long run is whether energy markets will make the deal a financially lucrative one for ExxonMobil.
The two Texas-based oil companies reached a definitive agreement that was announced early Wednesday. Under the terms of the deal, Pioneer received a value of $59.5 billion based on closing prices of ExxonMobil's stock as of Oct. 5. Pioneer shareholders are set to receive 2.3234 shares of ExxonMobil for each of their shares in the all-stock merger.
NYSE: PXD
Key Data Points
For ExxonMobil, the move dramatically increases the oil giant's stake in the oil-rich Permian Basin. In particular, Pioneer has rights to more than 850,000 acres in the Midland Basin area, which complements the 570,000 net acres that ExxonMobil controls there and in the nearby Delaware Basin. All together, the post-merger entity will have about 16 billion barrels of oil equivalent in the broader Permian area, and ExxonMobil expects its daily production would more than double to 1.3 million barrels per day.
The two companies hope to close the deal in the first half of 2024, assuming Pioneer shareholders approve the merger. Some of those investors might not be all that pleased with the deal, given that Pioneer's share price was significantly higher in 2022.
Plug keeps plugging itself into collaborations
Getting a bigger upward boost to its stock price was Plug Power, which opened higher by 8%. The clean energy company made a number of announcements that encouraged shareholders that the business is moving in the right direction.
Plug noted in one announcement that it is now the preferred supplier for green energy and metals company Fortescue, which has proposed to construct several green hydrogen production plants across the globe. The two companies are looking to take reciprocal stakes in each other's hydrogen plants, with Fortescue potentially taking 40% ownership in Plug's Texas-based plant while Plug looks for a 25% position in Fortescue's proposed plant in Phoenix. Plug sees the deal as affirming its leadership position in electrolyzer solutions, which are essential in producing the hydrogen necessary for fuel cell use.
NASDAQ: PLUG
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Meanwhile, Plug also said that Arcadia eFuels had picked Plug to provide a 280-megawatt proton exchange membrane electrolyzer for its sustainable aviation fuel plant in Denmark. Arcadia expects to use the resulting hydrogen to produce synthetic gas for further refining into jet fuel.
Deals like this are good for Plug Power, but the company also has to keep executing well on its broader strategy. Long-time shareholders have thus far been disappointed with Plug's performance, and it'll take further effort to reverse the stock's downward trend.
