Why ExxonMobil is paying $60bn for Pioneer
AMERICA’S SHALE patch is a testament to bottom-up capitalist enterprise. It was conquered by wildcat frackers, who came up with clever ways of horizontal drilling and releasing oil trapped in the rock formations. Independent shale specialists such as Devon Energy, EOG Resources and Pioneer Natural Resources became some of the country’s biggest oil producers, helping boost domestic output from 8m barrels per day in 2005 to 15m in 2015—and turn America from a net importer of oil to an exporter. Oil giants such as ExxonMobil and Chevron trod more gingerly into shalelands such as the Permian basin, not least because the wildcatters’ expansionary zeal earned fracking a reputation for torching billions in investors’ money.
More recently, the supermajors’ shale ambitions have grown. In June ExxonMobil’s boss, Darren Woods, stated his intent to double its shale-oil production over five years. It may not take that long. On October 11th ExxonMobil said it would buy Pioneer for $60bn in one of the biggest oil mergers ever. The deal would nearly double ExxonMobil’s domestic oil output in an instant, putting it top of the ranking of American producers (see chart). It is also likely to prompt more consolidation in what remains a fragmented industry. And it could once again make American shalemen the world’s swing producers.
Shale looks a much more profitable bet than it did a few years ago. A focus on costs has weeded out wasteful practices and improved operational efficiency. JPMorgan Chase, a bank, estimates that a dollar spent on exploration and production in America, a lot of it shale-based, produces twice as much oil today as it did in 2014. Rather than let methane, a potent greenhouse gas often produced alongside shale oil, escape into the air, big operators have begun—under pressure first from regulators and then, methane being a component of natural gas, from commercial logic—to recover the stuff and sell…
2023-10-11 13:48:59
Link from www.economist.com
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