By Sabrina Valle and Liz Hampton
HOUSTON (Reuters) -U.S. regulators gave the go-ahead on Thursday to Exxon Mobil (NYSE:XOM)'s $60 billion purchase of Pioneer Natural Resources (NYSE:PXD), 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 and raise energy prices, the Federal Trade Commission said.
Widely considered the dean of U.S. shale because of his long tenure and blunt comments on industry output and spending, Sheffield used his influence "to align oil production across the Permian Basin in West Texas and New Mexico with OPEC+," the FTC claimed.
“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 if the FTC would refer the collusion allegations to the U.S. Department of Justice for further investigation, a FTC spokesperson said: “The FTC has a responsibility to refer potentially criminal behavior and takes that obligation very seriously.”
The DOJ did not reply to a request for comment.
Pioneer said Sheffield had "neither the intent nor an effect of his communications to circumvent the laws and principles protecting market competition."
The FTC's consent for the deal will come as a relief to other energy companies with mergers under antitrust reviews. But it drew criticism from lawmakers over the industry's concentration. Multibillion-dollar deals involving Chevron (NYSE:CVX), Diamondback (NASDAQ:FANG) Energy, Occidental Petroleum (NYSE:OXY), and Chesapeake Energy (NYSE:CHK) are before the FTC.
"The American Big Oil oligopoly has for decades followed the lead of a foreign oil cartel to set high prices for consumers and reap mega-profits while destroying the planet," said Sen. Sheldon Whitehouse.
"It is disappointing that FTC is making the same mistake they made 25 years ago when I warned about the Exxon and Mobil merger in 1999," added U.S. Senate Majority Leader Chuck Schumer.
DEAL TO CLOSE FRIDAY
Exxon plans to close the Pioneer purchase on Friday. The deal will make it the largest oil producer in the Permian Basin with more than 1.3 million barrels of oil equivalent per day (boepd).
The oil giant said it will not add Sheffield to its board. It learned of the collusion allegations during the antitrust review, but the FTC investigation "raised no concerns with our business practices," a spokesperson said.
Its shares rose a fraction to $116.24.
The agreement frees Exxon to focus on a dispute with rival Chevron over its proposed acquisition of Hess Corp (NYSE:HES), which owns a 30% stake in a prized Exxon joint venture in Guyana.
Sheffield retired as Pioneer's CEO on Dec. 31, but continued to serve on its board and had been due to take a seat on Exxon's board when the acquisition deal closed.
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.
Sheffield was a regular speaker at energy investor and industry conferences. His pronouncements on OPEC production cuts and oil price trends were widely quoted.
The FTC complaint pointed to some of his remarks on the dangers of higher shale output as part of a "coordinated output reduction scheme" that threatened companies which did not restrain their production gains.
The agency described the executive's 2020 call for the Texas Railroad Commission, the state's energy regulator, to consider mandating production cuts as uncompetitive behavior. Sheffield's urging of state cuts was consistent with then President Donald Trump's urging OPEC to pare output to save U.S. oil jobs.
SHALE - OPEC TALKS
The FTC says collaboration between OPEC and American oil firms would lead to production growth rates below what would typically be observed in a competitive market, sending energy prices up.
Sheffield was among the 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 gains in market share, 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.
Attendees at the CERAWeek energy conference dinner included shale executives John Hess, Vicki Hollub, Rick Muncrief, and Domenic Dell (NYSE:DELL)'Osso. They would generally discuss the oil market, spare capacity, oil demand and shareholders' expectation for returns, some attendees have said.
Sheffield told Reuters in a March 2023 interview on Saudi Aramco (TADAWUL:2222)'s interest in developing its shale reserves that his company had twice hosted officials and explained the company's operations and business practices. Aramco is the national oil company of OPEC kingpin Saudi Arabia.