The stone age didn’t end because the world ran out of stones.
No, the stone age ended when somebody learned how to make a spear. Similarly, the oil age will not end because it runs out of oil. It will end when something demonstrably better and more economically viable is found or invented.
ExxonMobil isn’t sure when that day will come, but the company is betting it won’t be tomorrow.
The global giant just spent $59.5 billion in an all-stock deal to buy Pioneer Natural Resources. According to the Associated Press, including debt, Exxon is committing $64.5 billion to the acquisition to create a colossal shale oil fracking operator in west Texas.
“I think fossil fuels, as the world looks to transition and find … affordable energy with lower emissions … oil and gas are going to continue to play a role over time,” said ExxonMobil Chief Executive Officer Darren Woods in an interview with CNBC. “That may diminish with time … . ” CEO Woods explained that Exxon and Pioneer will be able to use their combined capabilities to drive down emissions and produce less carbon intense oil and gas. Huh? What does corporate merger have to do with emissions? In a word: nothing.
Be that as it may, it seems clear the acquisition, Exxon’s largest since it combined forces with Mobil two decades ago, will create economic efficiencies.
Pioneer’s 850,000 acres in the Midland Basin added to ExxonMobil’s 570,000 combined acres in the Delaware and Midland basins, nearly contiguous fields, will allow the company to trim drilling expenses, which have increased over the past two years because the cost of materials and labor have increased.
The combined company will have an estimated 16 billion barrels of oil equivalent in the Permian, and daily production based on 2023 volumes in west Texas will more than double to 1.3 million barrels per day. By 2027, that number will reach 2 million barrels per day.
By comparison, according to the Southwest Journal, Qatar is currently the 10th-largest oil producer in the world at 2.7 million barrels per day.
This is not the first financial move of the year by ExxonMobil. With record profits last year, it also announced the purchase of Denbury, a pipeline operator, in a $4.9 billion all-stock deal in July.
To be certain, renewable energy will continue to make headway in the present and future energy marketplace, and the investments made by Exxon-Mobil as well as other major integrated oil companies will make them part of it. But their bread and butter is still oil and gas. And make no mistake, there is still bread to be buttered for the foreseeable future.