By Sabrina Valle
WASHINGTON/HOUSTON (Reuters) – The Federal Trade Commission on Thursday said Exxon Mobil’s $60 billion purchase of Pioneer Natural Resources could go ahead on the condition Pioneer’s former CEO will not be allowed to join Exxon’s board.
The FTC’s consent order prevents former Pioneer Natural Resources CEO Scott Sheffield from taking an offered seat on Exxon Mobil’s board of directors to resolve antitrust concerns about Exxon’s bid to buy the top shale oil producer.
The executive, widely considered the dean of the U.S. shale business because of his long tenure and blunt comments on the industry, used his position “to align oil production across the Permian Basin in West Texas and New Mexico with OPEC+,” the FTC claimed.
The agreement frees Exxon to formally close the deal on Friday and allows it to focus on a dispute with rival Chevron over its proposed acquisition of Hess Corp, which owns a 30% stake in a prized Exxon joint venture in Guyana.
“Mr. Sheffield’s past conduct makes it crystal clear that he should be nowhere near Exxon’s boardroom,” said Kyle Mach, Deputy Director of the FTC’s Bureau of Competition.
The FTC said the executive engaged in efforts to coordinate with Texas producers to influence oil prices, exposing other U.S. producers to FTC questioning.
Concrete proof of price manipulation in the energy sector in the U.S. could have political ramifications and contradict Republican claims that President Joe Biden’s energy strategies are responsible for escalating fuel prices for consumers.
Pioneer said it was “surprised by the FTC’s complaint” but said it wanted the deal to close. Sheffield’s comments on the industry were “matters of public interest” and should not disqualify him from a board seat, a spokesperson said.
Exxon said it will not add Sheffield to its board. It learned of the collusion allegations during the antitrust review, but the lengthy FTC investigation “raised no concerns with our business practices,” a spokesperson said.
FTC says the collaboration between OPEC and American firms would lead to production growth rates remaining below what would typically be observed in a competitive market, sending prices up.
That was observed, for instance, following Russia’s invasion of Ukraine in 2022, which resulted in oil price spikes, and President Biden authorized the release of 180 million barrels of crude from the U.S. Strategic Petroleum Reserve to stabilize the market. Republicans who accused him of dangerously depleting the oil stockpile.
The acquisition will make Exxon the largest oil and gas producer in the top U.S. shale basin, doubling its output there to more than 1.3 million barrels of oil equivalent per day (boepd).
SHALE – OPEC TALKS
Sheffield was among the shale executives who last year attended near-annual dinners with OPEC members at a Houston energy conference. The private get-togethers began late last decade with invitations to Sheffield and others by OPEC’s late Secretary General Mohammed Barkindo.
OPEC had failed to halt U.S. shale’s rapid market share gains, and its members were surprised at how quickly U.S. companies were able to recover after a punishing oil-price war that spanned 2014 through 2016. The war ended when OPEC curbed its production and prices rebounded.
CERAWeek dinner attendees, which at times included shale executives John Hess, Vicki Hollub, Rick Muncrief, and Domenic Dell’Osso would discuss the oil market, global demand and oil shareholders’ expectation for returns, officials said at the time.
Sheffield told Reuters during a March 2023 interview on OPEC de facto leader Saudi Aramco’s interest in developing its domestic shale reserves that his company twice hosted officials and explained the company’s operations and business practices.
“We had a show-and-tell. We’ve done it twice now,” he told Reuters at the CERAWeek energy conference last year. “They can get the same information from most service companies. But they like to talk to producers … we have so much data.”
The visit included discussions with Sheffield and the company’s executive VP of operations on how they complete, or prepare wells for production, and how it drilled the long, horizontal laterals to extract more oil from shale, he said.
Pioneer said on Thursday Sheffield had “neither the intent nor an effect of his communications to circumvent the laws and principles protecting market competition.”
(Reporting by Sabrina Valle in Houston, Susan Heavey and Doina Chiacu in Washington; Editing by Chris Sanders and Nick Zieminski)
