Exxon to reach deal with Pioneer as FTC forces Sheffield withdrawal

(Bloomberg) — The U.S. Federal Trade Commission declined to challenge Exxon Mobil Corp.’s purchase of Pioneer Natural Resources Co. for $60 billion, but said Scott Sheffield, co-founder of Pioneer, should not sit on the supermajor’s board.

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The move, announced in a filing Thursday, will allay fears that the Biden administration is seeking to block a series of mega-oil and gas mergers, but it came at a steep price. The antitrust agency says it found evidence that Sheffield sought to communicate with OPEC and other U.S. producers about oil prices and production, which could raise costs for consumers.

“Mr. Sheffield’s past conduct makes it clear that he should not be anywhere near Exxon’s boardroom. American consumers should not pay unfair prices at the pump just to pad a man’s wallet. business executive,” Kyle Mach, deputy director of the FTC’s Bureau of Competition, said in a statement.

The FTC says its order will prevent Sheffield from engaging in “collusive activities” that could drive up crude prices and force U.S. consumers to pay higher fuel prices. The agency says he exchanged hundreds of text messages with OPEC representatives and officials about the oil market.

Exxon shares rose 0.3% before the start of regular trading in New York. Pioneer shares were unchanged.

The proposed consent order also prohibits Sheffield from serving in an advisory role at Exxon and prohibits the oil giant from appointing a Pioneer employee or director to its board of directors for a period of five years.

Exxon said in a statement that the company learned of the FTC’s allegations about Sheffield from the agency and that they were “completely inconsistent with the way we conduct our business.” Exxon has agreed to the terms of the consent judgment and plans to complete its acquisition of Pioneer on May 3, the company said.

Pioneer said it was surprised by the FTC’s allegations and disagreed with the agency’s findings.

“Mr. Sheffield and Pioneer believe that the FTC’s complaint reflects a fundamental misunderstanding of the U.S. and global oil markets and a misinterpretation of the nature and intent of Mr. Sheffield’s actions,” the company said in a statement. .

Selling his company to Exxon and gaining a board seat was the cornerstone of Sheffield’s career, as he led Pioneer for more than 20 years and was an early proponent of fracking in the basin Permian. Once the merger is finalized, Exxon will be by far the largest producer in the Permian Basin of Texas and New Mexico, which now pumps more oil per day than Iraq, the second-largest member of OPEC.

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In March, more than 50 lawmakers urged the FTC to step up its oversight amid concerns that a $230 billion consolidation wave over the past year would raise energy prices for consumers, squeeze suppliers and does not suppress salaries. Investors feared the agency, which had become more aggressive under President Lina Khan, would obstruct several major deals, particularly in an election year where the Biden administration is seeking to prove its climate credentials and rein in climate change. price of gasoline.

Chevron Corp., Occidental Petroleum Corp. and Chesapeake Energy Corp. are among the companies with large ongoing buyout transactions that are under intense scrutiny before the FTC.

Oil executives say the deals will benefit shareholders, consumers and the environment. Exxon CEO Darren Woods said the deal with Pioneer would lower its cost of production, making U.S. barrels more competitive in the global market and providing a strong platform for growth, which would ultimately benefit account to consumers. Exxon also committed to making Pioneer operations net zero by 2035, accelerating the previous goal by 15 years.

Sheffield is one of the few outspoken leaders in the U.S. shale sector, appearing frequently in media interviews and at industry conferences. He was an early advocate of the industry’s push for financial discipline rather than ramping up production at all costs, and was one of the first CEOs to call his company and d others to reduce flaring.

But it was Sheffield’s public and private communications with OPEC and other industry leaders that caught the FTC’s attention. He was a leading advocate of government-imposed rationing of Texas oil production during the crude market collapse in early 2020, which saw prices plunge below zero. His efforts to convince the Texas Railroad Commission, which oversees that state’s oil industry, to impose production caps for the first time in decades ultimately failed.

The Biden administration has often been at odds with the industry, but an easing of what many executives see as a necessary consolidation of the oil sector is likely to improve relations. With crude prices rising more than 10% this year and tensions growing in the Middle East, the administration is vulnerable to Republican attacks on measures that hurt the oil industry and raise gas prices.

The deal with Pioneer will combine two fast-growing operations in the Permian, boosting Exxon’s production in the basin to about 2 million barrels of oil equivalent per day by 2027, up from about 600,000 last year.

–With help from Joe Carroll, Joe Ryan and Mitchell Ferman.

(Adds statements from Exxon and Pioneer.)

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