Exxon-Pioneer deal greenlit by US FTC, Pioneer exec barred from board

By Sabrina Valle and Liz Hampton

WASHINGTON (Reuters) -U.S. regulators on Thursday gave the go-ahead to Exxon Mobil (NYSE:)’s $60 billion purchase of Pioneer Natural Resources (NYSE:), but barred Pioneer’s former CEO from Exxon’s board on allegations he attempted to collude with OPEC to raise oil prices.

Former Pioneer CEO Scott Sheffield coordinated efforts with U.S. shale oil producers to constrain their output production and raise energy prices, the U.S. Federal Trade Commission alleged.

Sheffield, widely considered the dean of the U.S. shale business because of his long tenure and blunt comments on industry output and spending, 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 (NYSE:) over its proposed acquisition of Hess Corp (NYSE:), which owns a 30% stake in a prized Exxon joint venture in Guyana.

Exxon said it plans to close the Pioneer purchase on Friday. Its shares gained as much as 1%, to $117.26, in morning trading.

“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.

When asked whether the FTC was referring the collusion allegations to the U.S. Department of Justice for further investigation, a FTC spokesperson said only: “The FTC has a responsibility to refer potentially criminal behavior and takes that obligation very seriously.”

The DOJ did not immediately reply to a request for comment.

The green light for Exxon is a positive sign for several other energy merger reviews. The FTC has separately requested additional information on billion-dollar energy deals involving Chevron, Diamondback (NASDAQ:) Energy, Occidental Petroleum (NYSE:), and Chesapeake Energy (NYSE:).

Pioneer said it was “surprised” by the FTC’s complaint but wanted the deal to close. Its former CEO’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 below what would typically be observed in a competitive market, sending energy 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 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 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 energy conference dinner attendees at times included shale executives John Hess, Vicki Hollub, Rick Muncrief, and Domenic Dell (NYSE:)’Osso. They would generally discuss the oil market, spare capacity, oil demand and shareholders’ expectation for returns, some attendees have said.

Sheffield told Reuters during a March 2023 interview on OPEC de facto leader Saudi Aramco (TADAWUL:)’s interest in developing its domestic shale reserves that his company twice hosted officials and explained the company’s operations and business practices.

Pioneer said on Thursday Sheffield had “neither the intent nor an effect of his communications to circumvent the laws and principles protecting market competition.”