Will ExxonMobil’s Acquisition of Pioneer Fail?

In October, ExxonMobil, the largest U.S. oil producer, announced it would acquire shale oil producer Pioneer for $59.5 billion in stock. Recently, the U.S. Federal Trade Commission (FTC) is investigating this huge transaction to clarify whether it constitutes a market monopoly. Some people worry that the FTC investigation may cause this blockbuster acquisition to fail.

ExxonMobil Chief Executive Darren Woods on December 7 dismissed concerns that the deal could be blocked. "I don't think there are any competitive concerns from this potential merger from any perspective," Woods said in an interview with the media.

Woods said that while the $60 billion deal may seem large, it is minuscule in the context of the U.S. oil market. He said that after acquiring Pioneer, the company's crude oil production will account for less than 5% of total U.S. production.

The FTC this week asked ExxonMobil and Pioneer to provide more information about the acquisition. Woods said ExxonMobil would respond as quickly as possible. Regarding the FTC investigation, he said, "We believe it is reasonable to conduct an investigation."

The FTC, which shares antitrust enforcement authority with the U.S. Department of Justice, can file a lawsuit in court to block the merger transaction. If the FTC chooses not to take action, it is actually equivalent to clearing the way for the transaction.

U.S. Senate Majority Leader Chuck Schumer, D-N.Y., and more than 20 of his Democratic colleagues have previously called on the FTC to review ExxonMobil's acquisition of Pioneer.

Senators believe the deals could lead to higher U.S. gasoline prices. "These deals have all the hallmarks of being harmful, anti-competitive, and if they are allowed to happen, Americans could see higher oil prices," Schumer said in a speech on the Senate floor last month.

Woods believes the deal will improve U.S. energy security and benefit consumers by leveraging ExxonMobil's technical capabilities and capital for shale resources.

On December 6, ExxonMobil released its plan to 2027, stating that it is expected to achieve further profit and cash flow growth potential of approximately US$14 billion in the next four years, and is expected to save US$6 billion in structural costs by 2027. Total annual capital expenditures and exploration expenses are expected to be $23 billion to $25 billion in 2024 and $22 billion to $27 billion annually from 2025 to 2027.