ExxonMobil on acquisition spree

Wednesday, 02 January 2019
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As the world’s top oil company, ExxonMobil does not need to worry about size when it comes to snapping up assets. The Texas-based oil giant is tipped as a potential buyer of Endeavor Energy Resources, the largest privately-held oil and gas producer in the U.S. Permian basin – a takeover could cost over $10 billion. 

Darren Woods, CEO of the Irving, Texas-based oil company did avoid answering questions by Bloomberg TV whether the Endeavor deal was imminent. “We have the capacity to do any size opportunity that can come about, so it’s really a function of looking at the value that Exxon Mobil can extract, and how we would integrate that into our portfolio,” he said but declined to specify takeover targets.

Already today, ExxonMobil surpassed its plan to mobilize about 30 rigs by year’s end: the company had 38 machines drilling Permian wells as of last week, a 40% rise in six months. Snapping up Endeavor would give ExxonMobil even more exposure to the liquid-rich shale formation.

An Endeavour takeover, if realized, would be line with Exxon’s actions last year to double its foothold in the Permian through the $5.6 billion acquisition of companies owned by the Bass family. Though this acquisition might come with a price tag of over $10 billion, analysts reckon ExxonMobil might well have the capability to do such a big deal, given that the oil major has more than $3 billion in cash on its balance sheet and low debt.

Pushing up Permian’s oil output

Dubbed ‘the hottest U.S. shale oil field’, the Permian could nearly double crude oil production by 2023, according to IHS Markit. A rise from currently 3.2 million barrels per day to 5.4 million bbl/d would push the Permian Basin past all countries except Saudi Arabia and Russia.

Once prices recovered from a protracted slump, the Permian has been the epicenter of the resurgence in shale drilling in recent years. Leading from the front, ExxonMobil announced plans to triple its production of oil and chemical feed-stocks in the Permian Basin to 600,000 barrels of oil equivalent by 2025.

Crude oil production from the liquids-rich Permian is forecast to increase five-fold over the next few years. WTI crude oil price have bounced up 26% this year through early October before shedding nearly all of the gains in over the past eight weeks, but Mr. Woods is not rushing fracking efforts in the region.

“The price in the oil markets are going to go up and come down again, and our view is the business we build in the Permian, we’re building for the long term,” he said in the interview. “It needs to be efficient, low-cost and effective, so we’re making sure the pace we go at allows that to happen.” 

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