UPDATED: FTC bars U.S. shale veteran Scott Sheffield from joining ExxonMobil board following Pioneer Natural Resources acquisition

Kevin Crowley and Leah Nylen, Bloomberg May 03, 2024

(Bloomberg) – The US Federal Trade Commission declined to challenge Exxon Mobil Corp.’s $60 billion purchase of Pioneer Natural Resources Co. on the condition that Pioneer co-founder Scott Sheffield be excluded from the supermajor’s board.

Pioneer Natural Resources co-founder Scott Sheffield

The decision, announced Thursday in a filing, will ease concern the Biden administration would seek to block a series of oil and gas mega-mergers, but it came at a hefty price. The antitrust agency alleges it found evidence Sheffield sought to communicate with OPEC and U.S. peers about oil pricing and output, potentially driving up costs for consumers.

The FTC order will prevent Sheffield from engaging in so-called “collusive activity” that could drive up pump prices for U.S. consumers. The agency says he exchanged hundreds of text messages with OPEC representatives and officials about the oil market.

Exxon shares were unchanged at 12:02 p.m. in New York. Pioneer shares rose 0.7%.

The proposed consent order also bars Sheffield from serving in any advisory capacity at Exxon and prohibits the oil giant from appointing any Pioneer employee or director to its board for five years.

Exxon learned of the FTC’s allegations regarding Sheffield from the agency and said in a statement that they are “entirely inconsistent with how we do business.” Exxon has agreed to the terms of the consent decree and plans to close the acquisition on May 3.

Pioneer said it was surprised by the FTC’s allegations and disagrees with the agency’s conclusions.

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

However, Pioneer and Sheffield “are not taking any steps to prevent the merger from closing,” according to the statement.

Selling his company to Exxon and landing a seat on the board were to have been a career capstone for Sheffield, who led Pioneer for more than 20 years and was one of the earliest proponents of fracking in the Permian basin. After closing the merger, Exxon will be far and away the biggest oil and gas producer in the Permian basin of Texas and New Mexico, which now pumps more oil than OPEC member Iraq.

Chevron Corp., Occidental Petroleum Corp. and Chesapeake Energy Corp. are among companies with large pending takeover deals that are undergoing in-depth reviews before the FTC.

Shale evangelist. Sheffield has been a leader in the U.S. shale patch, frequently appearing in media interviews and industry conferences. He was an early advocate of the industry’s push for capital discipline rather than ramping up production at all costs, and was one of the first CEOs to call on his company and others to reducing flaring.

Pioneer and Sheffield rebutted the FTC’s claims in an 850-word statement that said his efforts were an attempt to push back against the “predatory practices” of OPEC and Russia, which had flooded the market with oil on several occasions, including in 2020, to wipe out US shale. A disciplined shale sector would help to maintain a “sustain a resilient, competitive and economically vibrant oil and gas industry in the United States,” the company said.

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