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The merged company will have the largest oil and gas production in the Permian basin, one of the world’s premier oilfields, and about 11% of the total basin production. The Permian basin is close to the Gulf Coast where methane is converted to LNG (liquefied natural gas) that has entered its own golden age for marketing overseas – a clear winner for ExxonMobil
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This combination of factors is like a perfect storm in the history of modern oil and gas. But the new company’s influence won’t stop there – it also extends into climate change. As just one element of this, ExxonMobil have announced they will reach net-zero emissions in the Permian by 2030, only 7 years away. Other elements are even more significant (more on this later). All these add up to a gargantuan company with enormous influence in the future of not only oil and gas but also climate change. Let’s drill deeper into this unique situation.
Influence in the oilfield.
The market cap (number of shares times share price) is shown in Figure 1. Estimated value of ExxonMobil+Pioneer is $411 billion. This is 70% higher than Chevron, and roughly 41% higher than Chevron+Hess. And more than twice as high as other oil and gas majors. ExxonMobil+Pioneer has become a giant in the oil and gas space. But still far behind the world’s largest companies like Apple
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With the acquisition of Pioneer, Exxon plans to deploy its fine-tuned Delaware Basin drilling strategy into the heart of the Midland Basin, where the bulk of Pioneer’s leases lie. This includes an eye-catching design where horizontal wells that are 4 miles long are arranged in a cubic array.
How much production added? ExxonMobil is producing 620,000 barrels of oil-equivalent per day (boepd), and Pioneer brings in 711,000 boepd making a total of 1.33 MMboepd. This is 11 % of the entire Permian basin of about 12 MMboepd. ExxonMobil+Pioneer will be the largest shale oil producer in the world, bypassing Chevron.
By 2027, ExxonMobil+Pioneer could be producing 2 MMboepd which would be 45% of the company’s output, and would be a substantial increase from 1.33 MMboepd now. The total combined Permian reserves are estimated at 16 billion boe, which implies 15-20 years of drilling inventory.
The almost ideal juxtaposition of leases between Exxon Mobil and Pioneer gives ExxonMobil+Pioneer a total of 1.4 million acres. Other behemoth leaseholders in the Permian include Occidental with 2.9 million, Chevron with 2.2 million, and ConocoPhillips
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The new resource base of 16 billion boe will provide everything1 the new company needs for an enviable high-level operations and marketing enterprise, integrated from upstream to midstream to downstream refining and petrochemicals to exports of LNG in its golden age.
The influence of ExxonMobil+Pioneer on climate and the energy transition is enormous, and this analysis will follow in a separate article.
References.
1. Wood-McKenzie Press note, ExxonMobil acquisition of Pioneer Natural Resources creates world’s first Megamajor.
Takeaways.
In the Permian basin, ExxonMobil is producing 620,000 barrels of oil-equivalent per day (boepd), and Pioneer brings in 711,000 boepd making a total of 1.33 MMboepd. This is 11 % of the entire Permian basin of about 12 MMboepd.
The new resource base of 16 billion boe, which implies 15-20 years of drilling inventory, will provide everything the new company needs for an enviable high-level operations and marketing enterprise.
With its ambitious commitments to reduce emissions, the Permian may become a blueprint for a high-performance supply chain from upstream drilling to LNG and petrochemical products. ExxonMobil+Pioneer influence will be invaluable to other oil and gas companies.
Read the full article here