Exxon Mobil (NYSE:XOM)

Energy giant Exxon Mobil (NYSE:XOM) is reportedly in preliminary talks with the U.S. shale oil producer Pioneer Natural Resources (NYSE:PXD) about a potential acquisition, the Wall Street Journal reported. The discussions between the two parties about a possible deal have been informal, with sources cautioning that the talks might not progress into formal negotiations or Exxon might target another company.

Reportedly, Exxon executives have also discussed a potential tie-up with at least one more company. Overall, Exxon seems to be hunting for a major deal in the U.S. shale. If Exxon acquires Pioneer Natural, which has a market cap of $49 billion, it would be the largest deal for the oil behemoth since the megamerger with Mobil Corp. in 1999.

Further, this potential deal would give Exxon a leading position in the lucrative Permian Basin, a region where the company is already making huge investments. Fracking giant Pioneer Natural is known to be one of the leading oil producers in the Permian and holds massive resources in the region. It generated free cash flow of $8.4 billion in 2022.

Exxon had a stellar 2022 and is rich with surplus cash, thanks to the spike in oil and gas prices due to the Russia-Ukraine war. The company’s net income jumped by an impressive 142% to $55.7 billion in 2022. Exxon’s solid free cash flow of $62.1 billion helped in rewarding shareholders with dividends of $14.9 billion in 2022. Additionally, the company made share repurchases worth $14.9 billion.

Is Exxon Stock a Good Buy?

Wall Street is cautiously optimistic about Exxon Mobil, with a Moderate Buy consensus rating based on 12 Buys, five Holds, and one Sell. The company recently cautioned that its Q1 2023 earnings would decline compared to the fourth quarter of 2022, as energy prices have cooled off compared to last year.

The average XOM stock price target of $128.03 suggests upside potential of 11.3%. After an impressive run last year, shares have advanced just over 4% so far in 2023.