Exxon Mobil is buying Pioneer Natural Resources in an all-stock deal valued at $59.5 billion, its largest buyout since acquiring Mobil two decades ago, creating a colossal fracking operator in West Texas.

Including debt, Exxon is committing about $64.5 billion to the acquisition, leaving no doubt of the Texas energy company’s commitment to fossil fuels as energy prices surge.

Pioneer shareholders will receive 2.32 shares of Exxon for each Pioneer share they own.

Exxon purchased XTO Energy in 2009 for approximately $36 billion. In the late 1990s, the merger between Exxon and Mobil was valued around $80 billion.

The deal with Pioneer Natural expands Exxon’s presence in the Permian basin, a massive oilfield that straddles the border between Texas and New Mexico. Drilling the Permian accounted for 18% of all U.S. natural gas production last year, according to the U.S. Energy Information Administration.

Pioneer’s more than 850,000 net acres in the Midland Basin will be combined with Exxon’s 570,000 net acres in the Delaware and Midland Basin, nearly contiguous fields that will allow the combined company to trim costs.

That is a big driver of the deal.

Natural gas rigs in operation have declined over 26% in the U.S. since the start of the year, according to government data, largely due to the rising costs for drilling materials and labor over the past two years.

“Their tier-one acreage is highly contiguous, allowing for greater opportunities to deploy our technologies, delivering operating and capital efficiency as well as significantly increasing production,” Exxon Mobil CEO Darren Woods said of Pioneer in a prepared statement.

The company will have an estimated 16 billion barrels of oil equivalent in the Permian.

Once the deal closes, Exxon Permian production volume will more than double to 1.3 million barrels of oil equivalent per day, based on 2023 volumes. It’s expected to climb to about 2 million barrels of oil equivalent per day in 2027.

“The combination of ExxonMobil and Pioneer creates a diversified energy company with the largest footprint of high-return wells in the Permian Basin, Pioneer CEO Scott Sheffield said in a prepared statement.

Exxon Flush With Cash

Citi’s Alastair Syme wrote that the transaction could provide multiple benefits to Exxon.

“Across the industry, the logic of consolidation in the highly fragmented Permian shale remains compelling with significant gains to be achieved from economies of scale by minimizing facilities spend, optimizing drilling and reducing” general spending, Syme wrote.

Exxon is flush with cash. The company posted unprecedented profits last year of $55.7 billion, breezing past its previous record of $45.22 billion in 2008 when oil prices hit record highs.

Exxon Mobil Corp. has been using some of that cash on acquisitions. In July the company announced that it was buying pipeline operator Denbury in an all-stock deal valued at $4.9 billion.

Pioneer Natural has been making similar maneuvers. In 2020 the company said it was buying Parsley Energy in an all-stock deal valued at approximately $4.5 billion. It then purchased DoublePoint Energy in a cash-and-stock deal worth about $6.4 billion in 2021.

The boards of both companies have approved the transaction, which is expected to close in the first half of next year. It still needs approval from Pioneer shareholders.

Pioneer’s stock gained 2% before the market open on Wednesday, while shares of Exxon fell more than 2%.