Truist Securities analysts anticipate that the acquisition of Pioneer Natural Resources (NYSE:PXD) by ExxonMobil (NYSE:XOM) will bring moderate near-term incremental earnings and cash flow.
However, the longer-term benefits are expected to be more pronounced, particularly beyond 2025, thanks to a notably more productive inventory in the United States.
This includes the ramping up of production in Exxon's Guyana play, which is projected to exceed 600 thousand barrels of oil per day (mbopd) soon. Additionally, Permian volumes may potentially reach around 2 million barrels of oil equivalent per day (mmboepd) by 2027.
Considering these factors, analysts at Truist have increased the price target for Exxon from $110 to $131 per share and upgraded its recommendation from Hold to Buy.
“We recently suggested XOM would consider an additional acquisition after announcing the Denbury transaction, and we believe PXD checks all the boxes,” the analysts said.
“While XOM already has a large tier-one US inventory position, PXD’s stellar Permian position and key people (assuming several key employees stay) will likely improve XOM’s domestic well productivity to one of the best in the industry.”
Analysts add that Exxon's recent acquisition of Pioneer complements the earlier Denbury deal, significantly expanding the company's carbon capture sequestration (CCS) footprint. This strategic move enhances Exxon's position in the field of carbon capture and sequestration, contributing to its sustainability efforts.
“While the addition of the new company does not result in material near-term accretion, we believe future years could see a more sizable benefit. However, we believe the pro-forma company deserves a premium earnings multiple and cash flow yield given scale and likely well productivity second to none,” the analysts concluded.