FTC rocks oil industry with claim that Texas executive was colluding with OPEC to fix prices

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The US Federal Trade Commission declined to challenge Exxon Mobil Corp.’s $60 billion purchase of Pioneer Natural Resources Co. but asserted that Scott Sheffield, Pioneer’s co-founder, must not take a seat on the supermajor’s board. 

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

“Mr. Sheffield’s past conduct makes it crystal clear that he should be nowhere near Exxon’s boardroom. American consumers shouldn’t pay unfair prices at the pump simply to pad a corporate executive’s pocketbook,” Deputy Director of the FTC’s Bureau of Competition Kyle Mach said in a statement.  

The FTC says its order will prevent Sheffield from engaging in “collusive activity” that could drive up crude prices and force US 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 0.4% at 11:01 a.m. in New York. Pioneer shares rose 1.1%.

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.

“Mr. Sheffield and Pioneer believe that the FTC’s complaint reflects a fundamental misunderstanding of the US 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 rare outspoken leader in the US 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. 

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

The FTC’s complaint cites “voluminous evidence” that Sheffield tried to organize coordination between US shale producers and OPEC both in public and private. “We produced too much oil and competed with OPEC,” the complaint quotes Sheffield as saying in 2023. 

The agency alleged Sheffield acted as a “conduit” between US shale and OPEC, exchanging private messages with senior leaders on both sides. It also cited his attendance at dinners between American and OPEC producers at the prestigious, annual CERAWeek conference in Houston.

“Corporate executives are not always credible narrators,” FTC Chair Lina Khan said in a statement. “But when corporate executives’ words or actions reveal, against their interests, a belief that they can collude, we should generally believe them.”

Sheffield’s proposed appointment to the Exxon board would give him a “larger platform from which to advocate for greater industry-wide co-ordination,” the FTC said.

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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