Pioneer Natural Resources (PXD) is an oil stock that owns its own merits. But a new report that Exxon Mobil ( XOM ) could acquire Club Holdings will likely unlock even more value. Exxon has held “informal” discussions about buying Pioneer, the Wall Street Journal reported Friday, citing people familiar with the matter. There will be no possible deal until later this year or in 2024, the Journal reported. Exxon — which generated $62 billion in free cash flow in 2022 and ended the year with about $30 billion in cash — has held acquisition talks with at least one other oil-and-gas company, according to the Journal. Pioneer shares jumped more than 6% on Monday, to about $221 each — making it the best-performing energy stock in the S&P 500 by far. Shares of Exxon fell 0.25% to below $115. Pioneer and Exxon did not immediately respond to CNBC’s requests for comment Monday. Exxon’s reported interest in Pioneer is hardly surprising because the Texas shale driller is a “marquee” independent exploration-and-production company in the lower 48 states, Stifel analyst Derrick Whitfield told CNBC on Monday. If Exxon wants to meaningfully bolster its rig count in the Permian Basin, it “needs qualitative depth of equipment,” which Pioneer has, Whitfield said. The analyst, who has a buy rating and a price target of $286 per share on PXD, said the likelihood of a Pioneer-Exxon deal comes down to how much Exxon is willing to pay. “I think management will want … to improve the performance of their asset base and have a reasonably high stock price before coming to the table with Exxon Mobil,” Whitfield said. “It goes without saying that if Exxon Mobil offered a 25% premium, it wouldn’t be done. Personally, I had that number pegged in my mind. If you look at a 25% premium, I think it would bring them to the table because, Let’s be realistic, every independent wants to be acquired by Exxon Mobil.” The club believes that it may take a little more time to seriously consider the sale of Pioneer. A 25% premium from where Pioneer closed Thursday, roughly $208 per share, would make each share worth about $260. However, Jim Cramer said Monday that he thinks Pioneer CEO Scott Sheffield — an industry veteran in his second term at the helm of the company — would not hesitate to sell at a price below $285 a share. It reached Pioneer stock’s all-time closing high, June 2022 “I’m not saying he’s not going to sell. I’m saying he’s not going to sell this stock below where it was, because oil could go back to $90. [a barrel], the fact that he’s got the best Permian assets,” he added. Exxon’s interest in the company has been reported, adding twice as much to our PXD shares in the past month, below Monday’s market price. Our most recent purchase of 25 shares on March 20 was about $185- came in. Pioneer’s appeal stems in large part from its qualitative shape and low oil price breaks, roughly $39 a barrel. That enables the firm to generate large amounts of free cash flow and return it to shareholders through stock buybacks and quarterly dividends. Exxon is an acquisition. Knowing that is tempting for, investors may view Pioneer and other Permian operators more favorably. Stifel’s Whitfield believes the Journal story could put a near-term floor under Pioneer’s stock price — a view we share. At the very least, Pioneer shareholders are more likely to stay invested. Maybe the company, said Whitfield. And that is certainly our intention at this time. “What I suspect will strengthen the shareholder base is because you now have an article that directly links ExxonMobil to Pioneer, and the way it was set up, there’s clearly an interest there,” Whitfield said. “I think if you’ve seen Pioneer [a] A much higher stock price in the past, which gives you a lot more conviction to hold it now.” (Jim Cramer’s Charitable Trust is long PXD. See here for a full list of stocks.) With Jim Cramer as a subscriber to the CNBC Investing Club, before Jim makes a trade you Receive a trade alert. Jim waits 45 minutes before sending a trade alert before buying or selling a stock in his charitable trust portfolio. If Jim is talking about a stock on CNBC TV, he waits 72 hours after the trade alert is issued before executing the trade. Investment Club information provided above is subject to our Terms and Privacy Policy, together with our disclaimer. Disclaimer, disclaimer, disclaimer Any information provided in connection with Investing Club. No specific results or profits are guaranteed.
Permian Basin rigs in 2020, when U.S. crude oil production falls by 3 million a day as Wall Street pressures to reduce mandates.
Paul Ratze AFP | Getty Images
Pioneering natural resources (PXD) is an oil stock that owns its own merits. But a fresh report that Exxon Mobil (XOM) Club holdings could potentially unlock even more value.