Is Exxon Mobil CEO Darren Woods seeking protection from President Biden? On Wednesday the oil and gas giant struck a $59.5 billion deal to buy Pioneer Natural Resources. The way to read the deal is as a bet on U.S. shale fracking and hedge against the left’s anti-fossil fuels policies.
The acquisition is a response to higher interest rates that are raising the cost of capital for smaller producers, as well as to a hostile regulatory environment making it more difficult to explore and develop new resources. It would make Exxon the biggest player in the rich Permian shale basin that spans Texas and New Mexico. Wildcatters pioneered hydraulic shale fracturing, aka fracking, and horizontal drilling some two decades ago.
Many failed or sold out to larger producers when oil prices plunged in the middle of the last decade and again during the pandemic. Now rising interest rates are making it more expensive to drill, which is encouraging more consolidation. Pioneer holds prized assets in the Permian, which Exxon says complement its own.
By combining they will be able to drill longer, more productive horizontal wells while reducing the need to acquire new leases and permits. Exxon says the deal will let it drill laterals up to four miles long, resulting in fewer wells and a smaller environmental impact. The merger would more than double Exxon’s current Permian production and nearly quadruple it by 2027 to two million barrels of oil equivalent a day, which is more than half of its current worldwide production.
Exxon is making a huge bet on U.S. shale despite its forays into biofuels and carbon capture that are heavily subsidized by the Inflation Reduction Act (IRA). The Permian is among the lowest cost drilling regions in the
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