© Reuters. FILE PHOTO: Exxon Mobil logo and stock graph are seen through a magnifier displayed in this illustration taken September 4, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Mrinalika Roy and Sabrina Valle

(Reuters) -Shares of Pioneer Natural Resources (NYSE:) climbed nearly 11% on Friday on news that Exxon Mobil (NYSE:), the largest U.S. oil and gas company, was in advanced talks to buy the shale producer in a deal valued at a whopping $60 billion.

A deal would be Exxon’s biggest acquisition since its $81 billion acquisition of Mobil in 1998. It would make the company one of the leading producers in the lucrative Permian basin, the largest U.S. shale oil field as the country’s oil production closes in on an all-time record of 13 million barrels a day.

Pioneer’s shares were trading at $238.50 on Friday, valuing the company at nearly $56 billion. The offer implies a roughly 20% premium to Pioneer’s Thursday close. Exxon shares were down 1.6%

Friday’s gains leave the stock short of the offer, as it is possible that the two companies will not reach an agreement.

The premium is line with other E&P mergers this year, but “still strikes us as slightly low for a company with the unique scale and quality of inventory held by Pioneer,” said Andrew Dittmar, a director at Enverus.

“It is a significant win for Exxon… an attractive price to acquire a unique Permian portfolio.”

Pioneer holds an estimated 6,300 net locations of high-quality inventory, according to Enverus.

The deal value implies Exxon is paying about $4.5 million for Pioneer’s high-quality locations and $3.7 million for all locations, above the recent M&A trends that have valued assets around $3 million per location, Enverus said.

If the negotiations conclude successfully, an agreement between Exxon and Pioneer could be reached in the coming days, Reuters reported on Thursday, citing three sources.

However, any deal could attract political and regulatory scrutiny.

“Pioneer is the Permian’s largest operator at 9% of gross production while Exxon is No. 5 at 6%. Combined amounts to 15% of operated Permian production, but only 6% of total US production. These datapoints are relevant given FTC scrutiny around consolidation,” RBC Capital Markets analyst Scott Hanold said in a note.

oil output rose to just shy of 13 million barrels per day (bpd) in July, only slightly less than the record set in November 2019.

However, oil companies have reined in their spending on exploration in the last few years due to expectations for growth in renewable energy.

Industry experts said the deal could set a precedent for more large-scale M&A in the sector.

“This is the beginning of a massive consolidation in the industry,” said Bill Smead, chief investment officer of Smead Capital Management, which manages $5.2 billion in funds with a quarter of that in oil and gas.