Pioneer Natural Resources: Raising Fair Value 35% to $274 After ExxonMobil Announces Acquisition

ExxonMobil XOM officially announced intentions to acquire Pioneer Natural Resources in an all-stock deal slated to close in the first half of 2024. Exxon will offer 2.3234 shares per one share of Pioneer, which, based on our Exxon fair value estimate of $118, implies a $274 per share valuation for Pioneer. This represents a 35% premium to our stand-alone Pioneer valuation of $203 per share and an 11% premium to the market-implied valuation of about $247 per share (based on Exxon’s Oct. 11 closing price). Our stand-alone valuation incorporates a $60/barrel oil price assumption over the long run, whereas the market likely incorporates a long-term outlook closer to $70/barrel on average, which is not unreasonable, in our view. We maintain a more favorable outlook for ExxonMobil than the market, however. At the time of writing, shares trade at a roughly 10% discount to our ExxonMobil fair value estimate. We’re confident the transaction will proceed as planned and raise our Pioneer fair value estimate to $274 following the announcement. Our narrow moat rating is unchanged.

The deal aligns well with Pioneer’s new development strategy—launched in 2022 to address declining well performance—and its continued pursuit of capital efficiency gains, as capital discipline remains the central focus across the exploration and production industry. We anticipate scale-based efficiency gains and technological advancements, particularly in drilling and completions operations, will enhance overall resource recovery, moving forward. ExxonMobil’s management guided to deal synergies approaching $2 billion per year over the next 10 years.

For more information on the acquisition, please reference our Oct. 12 note for ExxonMobil.