Shale oil specialist Pioneer Natural Resources (NYSE:PXD) is currently part of a historic merger with a whale in the energy industry, which would turn the combined company into an energy powerhouse. Therefore, I am bullish on PXD stock and expect its investors to enjoy solid returns over the long term.
While it’s not the biggest of the Big Oil majors, Texas-based Pioneer Natural Resources is a fossil fuel giant in its own right. The company drills for petroleum in America’s oil-rich Permian Basin region and is a leader among U.S. shale oil drillers or “frackers.”
Even before the big news (which we’ll discuss in a moment) was announced, Pioneer Natural Resources was already doing well on its own. The company has an excellent track record of profitability and quarterly EPS estimate beats. Now, however, Pioneer is pioneering a potential wave of Permian M&A activity by joining forces with a true behemoth in the American oil patch.
Historic News for Pioneer Natural Resources
This year, we’re all bearing witness to the biggest and most impactful U.S. energy-industry merger in many years. It will also probably kick off a tidal wave of M&A activity in the Permian Basin, as traditional petroleum drillers will see this acquisition and want to forge their own deals with shale oil drillers.
Here’s the rundown. In an all-stock deal, Exxon Mobil (NYSE:XOM) agreed to buy out Pioneer Natural Resources for $59.5 billion, or $253 per PXD stock share. This deal represents the biggest corporate takeover announced in 2023, though the buyout isn’t expected to be finalized until the first half of 2024.
It’s not difficult to figure out why Exxon Mobil would want to purchase Pioneer Natural Resources. It’s not really about Pioneer’s financials; what Exxon Mobil wants is to combine its traditional petroleum-drilling resources with Pioneer’s shale assets. Thus, instead of being rivals in the American oil space, the two companies can join forces and crowd out the competition.
Combining Two Energy Rivals Into a Giant
As you might expect, Exxon Mobil CEO Darren Woods offered highly complimentary commentary about Pioneer Natural Resources. Specifically, he called Pioneer a “clear leader in the Permian with a unique asset base and people with deep industry knowledge.” Moreover, Woods expects that together, the two companies will “provide long-term value creation well in excess of what either company is capable of doing on a stand-alone basis.”
That would be empty talk without some numbers to back it up, so here are a couple of notable forecasts. The Exxon Mobil-Pioneer combination is expected to produce two million barrels of petroleum per day in the Permian Basin region by 2027 (according to Exxon Mobil’s projections). Plus, on a global scale, Exxon Mobil now targets the production of five million barrels of petroleum per day by 2027.
This is awe-inspiring, but some investors might wonder what will happen to their Pioneer Natural Resources stock shares post-merger. There’s no need to lose sleep at night, though. Reportedly, Exxon Mobil and Pioneer have agreed to a share exchange deal whereby each PXD shareholder will receive 2.3234 shares of XOM stock. Consequently, you can still buy Pioneer stock now and just hold on to it in order to get exposure to a combined mega-giant in the U.S. energy-production industry.
Is PXD Stock a Buy, According to Analysts?
On TipRanks, PXD comes in as a Moderate Buy based on eight Buys, 12 Holds, and two Sell ratings assigned by analysts in the past three months. The average Pioneer Natural Resources price target is $261.70, implying 8.6% upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell PXD stock, the most accurate analyst covering the stock (on a one-year timeframe) is Leo Mariani of Roth MKM, with an average return of 31.13% per rating and a 80% success rate. Click on the image below to learn more.
Conclusion: Should You Consider PXD Stock?
If you’re bullish on the growth prospects of Pioneer Natural Resources combined with Exxon Mobil, then you can buy shares of either company. Suffice it to say, you’ll get portfolio exposure to a huge combined company with traditional and shale oil market resources.
Truly, we are witnessing a watershed moment with the merger between Exxon Mobil and Pioneer Natural Resources. Now is a great time to consider PXD stock and/or XOM stock in hopes of long-term energy-industry returns on your investment.
