U.S. antitrust authorities are investigating ExxonMobil's plan to acquire Pioneer Natural Resources, which would be the biggest oil and gas deal in two decades, according to securities filings.
The Federal Trade Commission sought additional information from the companies about the deal, a step it takes when considering whether a merger could be anticompetitive under U.S. law, Pioneer revealed in a filing Tuesday. Merger investigations take an average of about 10 months to complete, according to data compiled by law firm Dechert.
The FTC, which shares antitrust authority with the Justice Department, can sue to block a merger or refuse to take action, effectively authorizing the deal. Sometimes companies cancel deals when they discover that an antitrust agency plans to sue to stop the transaction. Agencies annually investigate about 2% to 3% of businesses that are large enough to require reporting to the government.
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Exxon proposed in October to buy Pioneer in a $59.5 billion, all-stock deal, an acquisition that would make Exxon the largest producer of oil in the Permian Basin of West Texas and New Mexico, the field most active oil company in the USA. It would be Exxon's biggest deal since its $75 billion merger with Mobil in the late 1990s.
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“We are working to provide the requested information,” Exxon spokeswoman Michelle Gray said in a written statement. “From an anti-competitive perspective, it is critical to remember that the combined companies represent approximately 5% of total U.S. oil and gas production.”
Shares of oil companies fell as U.S. oil prices fell on Tuesday. Exxon shares fell nearly 2% on Tuesday to $100.44. Pioneer shares also fell 2% to $225.78.
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Some oil industry executives and dealmakers predicted that a recent series of acquisitions would draw federal antitrust scrutiny. But antitrust regulators have rarely taken action to block deals involving oil producers, often considering their products to compete globally.
Investors expect big oil companies to continue to win over smaller rivals. As prime drilling sites in the Permian have become harder to find, executives have realized they can extract more value from their land by selling it than by drilling it.
Two weeks after Exxon announced its plans, Chevron said it would buy Hess in a $53 billion, all-stock deal. Occidental Petroleum is in talks to buy CrownRock, a large private oil company in the Permian, for more than $10 billion, the Wall Street Journal reported last week.
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Some analysts argue that Exxon and Pioneer together represent an insignificant portion of global oil production and that the deal could not affect oil or fuel prices. Exxon said it could save billions of dollars in value through synergies by bringing its operations to Pioneer's land, and it downplayed the need to make employee cuts.
Exxon Chief Executive Darren Woods said the deal would increase U.S. energy security and benefit consumers by bringing the oil company's technical capabilities and financial resources to bear on shale resources.
More than half of U.S. shale oil production comes from the Permian Basin. Pioneer's acreage is some of the best in the region, with about 16 years of drilling sites remaining at the current rate of operations, according to energy analytics firm Enverus.
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Exxon said companies could pump 2 million barrels of oil per day by 2027 in the Permian. The region currently produces about 6 million barrels per day, according to the Energy Information Administration.
The FTC issued the investigation request to the companies on Monday. Pioneer said the companies are cooperating and still expect the deal to close in the first half of 2024.
In 2016, oilfield services companies Halliburton and Baker Hughes called off a nearly $35 billion partnership after the Justice Department and regulators in other countries pushed back. These companies provide equipment and services to oil producers like Exxon.
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The FTC, under the Biden administration, has taken a tough stance on mergers, although its judicial record is mixed, especially when it has tried to block big tech deals.
The commission under the chairmanship of Lina Khan took legal action to challenge 11 deals, including acquisitions by Meta Platforms and Microsoft. Nineteen companies abandoned business after being investigated by the FTC, including five that were canceled after the FTC sued to block them.