Pioneer Natural shares were rising sharply Monday.
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Pioneer Natural Resources
surged Monday on a report that
Exxon Mobil
could acquire the fracker.
Exxon (ticker: XOM) has held informal discussions with
Pioneer Natural
(PXD) about a potential acquisition, The Wall Street Journal reported on Friday, citing people familiar with the matter. Any deal wouldn’t come together until the end of the year, and it is possible nothing comes from the discussions, according to the Journal.
Both Exxon and Pioneer told Barron’s that they don’t comment on market rumors or speculation.
Because the stock market was closed in observance of Good Friday, investors had their first chance to trade on the news on Monday. Shares of Pioneer Natural jumped 5.8% to $220.22 and it was the third-best performer in the
S&P 500.
In a research note, Wells Fargo analyst Roger Read wrote that “with one of the largest and best acreage positions within the
Permian
Basin, merging with PXD could make strategic sense for many companies desiring a larger Permian footprint.”
The Permian Basin is an oil- and gas-producing area in West Texas and New Mexico. According to Pioneer Natural, the resources deep below the Permian’s surface “could rival the supply of what’s now considered the world’s largest oilfield in Saudi Arabia,” and the company has made the decision to become a “Permian pure-play company.”
Exxon considers the Permian to be one of the company’s key growth areas as it pulls back from some other drilling projects. There are few companies with the kind of heft and profitability in the Permian to rival Pioneer—and a combination would make Exxon the largest producer in the region.
David Wagner, portfolio manager at Aptus Capital Advisors, which owns both companies, told Barron’s that Pioneer has long been mentioned as a possible takeover candidate, so the latest news is no surprise. “For the last five or six years, a thesis for an equity investor was that they would get bought out because the perception is they were one of the best operators,” he said.
But he thinks Pioneer is unlikely to sell at or near current prices. “It’s really tough for me to think [Pioneer CEO] Scott Sheffield is gonna sell this company for below a value that it was traded at a year ago,” he said.
Pioneer’s 52-week high is $288, about 30% above Monday’s prices. The stock has fallen 2.9% this year.
Pioneer is scheduled to report first-quarter earnings on May 3. Mizuho analyst Nitin Kumar, who rates the stock as a Buy with a $265 price target, wrote in a research note last week that the company “is seeing no further increases in service costs due to inflationary pressures. However, they are not planning for any decreases in costs yet either.”
Write to Angela Palumbo at [email protected]
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