Pioneer Expects ExxonMobil Merger to Close June 2024 despite Probe

The United States’ competition regulator has launched an investigation into ExxonMobil Corp’s purchase of Pioneer Natural Resources Co., but Pioneer expressed confidence the $64.5 billion acquisition will be completed by mid-2024 as planned.

A group of senators had on November 1 written to the Federal Trade Commission (FTC) to probe the agreed mergers between ExxonMobil and Pioneer, and Chevron Corp. and Hess Corp. They warned the moves would harm competition, risk raising oil and gas prices and reduce domestic output.

Oil and gas explorer and producer Pioneer confirmed the start of an investigation into its absorption by ExxonMobil in a regulatory filing this week, saying the investigation is part of the regulatory review process before the transaction could be concluded.

“Yesterday [December 4], Pioneer and ExxonMobil each received a request from the Federal Trade Commission for additional information related to its review of the proposed merger transaction announced on October 11, 2023”, Irving, Texas-based Pioneer said in the disclosure with the US Securities and Exchange Commission (SEC).

Permian basin-focused Pioneer said the investigation could take several months but that it still expects to fulfill the transaction by mid-2024. It assured of cooperation with authorities.

“The closing remains subject to receipt of required regulatory and shareholder approvals and satisfaction or waiver of other closing conditions”, the filing stated. “It is important to remember that we remain separate companies and must continue to operate independently until the transaction closes”.

Announcing the deal for the all-stock purchase October 11, ExxonMobil said its purchase of Pioneer would raise its reserves in the US Permian to 16 billion barrels of oil equivalent.

“The merger combines Pioneer’s more than 850,000 net acres in the Midland Basin with ExxonMobil’s 570,000 net acres in the Delaware and Midland Basins, creating the industry’s leading high-quality undeveloped U.S. unconventional inventory position”, it said at the time.

Later on October 23 Chevron and Hess announced their merger, in another consolidation of competitors worth $60 billion in terms of transaction-plus-debt-assumption value.

The agreements prompted members of the US upper house of parliament to ask the FTC to investigate, warning the country’s oil and gas industry is already “too concentrated”.

“By allowing Exxon and Chevron to further integrate their extensive operations into important oil-and-gas fields, these deals are likely to harm competition, risking increased consumer prices and reduced output throughout the United States”, the 23 senators wrote in the letter.

“At the regional level, the deals threaten to harm small operators and suppress wages”.

The lawmakers recalled, “In the 1990s, over 2,600 mergers occurred throughout all segments of the U.S. petroleum industry”.

“Between 1990 and 2001, the number of major U.S. energy companies plunged by more than half, dropping from 19 to 9, due to merger activity”, they added. “Most notably, Exxon merged with Mobil in 1999; Chevron merged with Texaco in 2001 (after Chevron had already acquired Gulf Oil and Texaco had already bought Getty Oil in the 1980s)”.

“Such consolidation enabled anticompetitive coordination in the industry, and the remaining firms were well aware that they were members of an oligopoly with a ‘small number of companies involved, all of whom share a motivation to recoup costs and not undermine the market’”, the letter said quoting a Senate report May 2002 on how gas prices are determined in the US.

Citing a May 2004 investigation, the letter went on, “The Government Accountability Office found that five specific mergers from that time period – Marathon-Ashland, Shell-Texaco I (Equilon), BP-Amoco, MAP-UDS, and Exxon-Mobil – led to wholesale gasoline price increases ranging from 0.39 to 5.00 cents per gallon”.

The legislators noted that after the mergers the resulting companies cut back on drilling spending and upstream production at a time of high prices.

However, ExxonMobil chief executive Darren Woods asserted in a corporate plan presentation held after the disclosure of the investigation, “This acquisition is a win any way you look at it”.

“By combining the capabilities of our two companies, we expect to recover more resource, more efficiently, with better environmental performance, including the acceleration of Pioneer’s net-zero Permian ambition from 2050 to 2035”, Woods said, according to a filing with the SEC on Wednesday.

Democrat Senator Amy Klobuchar, representative for Minnesota state, welcomed the FTC’s opening of an investigation into the ExxonMobil-Pioneer merger.

“When the largest oil-and-gas company in the United States attempts to acquire a significant direct competitor in a deal that would allow it to dominate the country's most prolific oil-producing region, antitrust enforcers must thoroughly scrutinize the merger to protect competition and consumers from higher prices at the pump”, Klobuchar, one of the senators who requested an investigation, said in a statement.

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