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ExxonMobil to consider buying US shale rival

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Reuters report sources familiar with the matter as saying that US-based ExxonMobil is in talks to buy Pioneer Natural Resources in a deal worth $60 billion.

Pioneer is the third-biggest manufacturer of oil within the prolific US Permian Basin of Texas and New Mexico, after Chevron, the maker of Texaco lubricant and grease products, and ConocoPhillips. The deal would be the largest acquisition Exxon has made since it bought Mobil for $81 billion in 1998, but it would massively expand the company’s presence in one of the most coveted locations for oil production in the US. In particular, the Permian Basin is prized for its relatively low breakeven costs.

On Thursday, Pioneer had a market value of $50 billion, but news of the potential deal saw its share price rise to $240.47 in Friday’s premarket trading, an increase of 12%, while the share price of ExxonMobil dropped by 1.7%.

The deal is believed to be attractive for Exxon because it would enable it to increase production when needed using Pioneer’s proven resources, rather than invest in developing unproven plays. Smead Capital Management’s chief investment officer, Bill Smead, said to Reuters:

“It makes complete sense. You replenish your reserves without poking holes in the ground.”

The three sources, who wished to remain unnamed due to confidentiality issues, said that a deal could be reached within days. Nevertheless, given that oil companies have come under fire recently for making high profits, any deal will likely attract scrutiny from regulators and politicians.

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