Exxon’s Acquisition of Pioneer Could Impact US Shale Oil Suppliers and Pipelines
Exxon Mobil’s Planned Acquisition
Exxon Mobil, the top oil producer in the United States, is planning to acquire Pioneer Natural Resources, the leading producer in the Permian shale region. This acquisition could have significant implications for output growth in the largest US oilfield, affecting pipeline companies and suppliers. Industry executives and energy advisors have voiced concerns about the potential impact of this consolidation.
Effects on Output Growth
The Permian shale formation in West Texas and eastern New Mexico has experienced a slowdown in production growth due to consolidation, rising costs, and investor demands for returns. Government data shows that crude production in the Permian is expected to rise by around 430,000 barrels per day this year, significantly lower than the 1 million-bpd increase in 2019.
Exxon had set a target of up to 1 million bpd for its operations in the Permian by 2025, but this target has been pushed back to 2027. However, if Exxon acquires Pioneer, its output would exceed this goal, potentially reducing the need for rapid growth.
Impact on Service Providers
The acquisition of Pioneer by Exxon would give the company considerable leverage in negotiating contracts with service providers. This could lead to better pricing for Exxon and a shift in volumes on pipelines co-owned by the two companies. The consolidation of the oil industry has already resulted in reductions in active drilling rigs, which in turn affects the oilfield service business and pipelines.
Job cuts at acquired companies have been observed in the past following mergers, and the industry expects similar outcomes if this acquisition goes through.
Government Response and Outlook
Antitrust lawyers and experts believe that the White House would struggle to prevent the Exxon-Pioneer acquisition. However, no official comment has been made by Exxon regarding these acquisition discussions. CEO Darren Woods has expressed the company’s focus on developing technology in-house to identify potential acquisition targets.
While oil producers in the US are pumping more oil, the overall pace of growth has slowed due to lower drilling activity. The consolidation of the industry, including recent mergers like Civitas Resources and Callon Petroleum-Percussion, has contributed to a decrease in active drilling rigs.
The acquisition of Pioneer by Exxon Mobil has the potential to reshape the US shale oil industry. With the consolidation of major players, pipeline companies, and suppliers may face challenges and changes in pricing. The impact on output growth and job opportunities remains uncertain, but the industry is closely watching the developments.