The founder and former CEO of Pioneer, Scott Sheffield, will not be able to join Exxon’s board or exercise advisory functions once the oil giant completes the purchase of the firm he led. The Federal Trade Commission (FTC) accuses him of attempting to coordinate, through public statements and private communications, with representatives of the Organization of the Petroleum Exporting Countries (OPEC) and the expanded OPEC+ organization, to reduce oil production. and gas. That would have meant that “Americans paid higher prices at the pump, to inflate their company’s profits,” according to the regulator. Pioneer rejects the accusations, but will not block the merger due to its founder’s veto.
Exxon agreed to buy Pioneer in October last year for about $60 billion and the deal was subject to regulatory approval. The veto against Sheffield is one of the conditions that the FTC has set to close it. Your decision seeks to prevent said manager from engaging in collusive activities that could raise crude oil prices, leading American consumers and businesses to pay higher prices for gasoline, diesel, heating oil, and jet fuel.
In its charge sheet, the FTC accuses him of violating antitrust laws. “Mr. Sheffield has not limited himself to making public signals to his American counterparts. He has also had repeated private conversations with senior OPEC representatives assuring them that Pioneer and its Permian Rivals were working hard to keep oil production artificially low,” he says, although some of the content, such as the specific messages exchanged, are crossed out in the resolution.
Through public statements, text messages, in-person meetings, WhatsApp conversations and other communications while at Pioneer, Sheffield sought to align oil production across the Permian Basin in West Texas and New Mexico with OPEC+ . His conduct, according to the regulator, was part of a sustained and prolonged strategy to coordinate production reductions.
Sheffield, for example, exchanged hundreds of text messages with OPEC representatives and officials about crude oil market dynamics, prices and production. Discussing his efforts to coordinate with Texas producers under a production cut ordered by the Texas Railroad Commission, Sheffield said: “If Texas leads the way, we might get OPEC to cut production.” . Perhaps Saudi Arabia and Russia will follow. “That was our plan.” “I was using OPEC+ tactics to get a bigger OPEC+,” he added.
“Mr. Sheffield’s past conduct makes it abundantly clear that he should be nowhere near Exxon’s boardroom. “American consumers should not pay unfair prices at the pump simply to line an executive’s pocket,” said Kyle Mach, Deputy Director of the FTC’s Bureau of Competition. “The FTC will remain vigilant in its enforcement efforts to protect competition in these vital markets,” he added.
Sheffield’s appointment as a director of Exxon after the merger, according to the FTC, “would give him a broader platform from which to advocate for greater coordination across the sector, as well as greater influence in decision-making not only of the largest producer of the Permian basin, but also of the largest oil multinational”, holds the writing.
The FTC further notes that Sheffield is already a director of The Williams Companies, which operates a series of natural gas pipelines; natural gas collection, processing and treatment assets; and other businesses that directly overlap with Exxon’s operations, so his entry into Exxon would also be anticompetitive.
The FTC resolution prevents Exxon, for a period of five years, from appointing any Pioneer employee or director as a company director, with some exceptions.
The operation continues
Pioneer has responded in a statement to the allegations: “We disagree and are surprised that the FTC complaint says that Mr. Sheffield’s record and statements on matters of public interest should disqualify him from serving on ExxonMobil’s Board of Directors. Despite this, Pioneer and Mr. Sheffield will not take any action to prevent the closing of the merger,” he indicates. “As he has done throughout his career, Mr. Sheffield has chosen to put the interests of investors, employees and the competitive health of the American energy industry before his own.”
The company believes that the FTC’s allegations reflect a misunderstanding of the US and global oil markets and that it misunderstands the nature and intent of its founder’s actions. He explains that the collapse in oil demand during the pandemic, which led crude oil to trade at negative prices in 2020, posed a threat to the stability and competitiveness of the US energy industry. “Given the importance and unusual circumstances, Mr Sheffield, as a leading and internationally respected authority in the sector, raised his concerns in order to raise awareness of the issue and encourage state, federal and international governments to act, including by encouraging action legally authorized by the Texas Railroad Commission when the global pandemic and the oil market were at their worst,” he explains. The company assures that his statements were protected by freedom of expression.
Pioneer was founded in 1997 by Sheffield, who has been running it for more than 20 years and is nearing retirement. It has been a protagonist of the shale oil boom in the United States and the company has become the largest oil producer in Texas. The rise of hydraulic fracturing for oil extraction has allowed the United States to become the largest crude oil producer in the world. Pioneer leveraged its relative strength in the pandemic to buy two other companies, Parsley Energy and DoublePoint Energy, for a total of $11 billion.
Unlike conventional crude oil, shale oil and gas are typically found in smaller pockets and often require hydraulic fracturing (fracking) to release hydrocarbons trapped in rocks, which makes the technique somewhat controversial. The extraction process is more expensive, but with high oil prices it makes it possible to make profitable reserves that were previously considered unviable.
The operation unites two of the largest surface owners in the Permian Basin of Texas and New Mexico, which would make Exxon the largest oil producer in the basin, with a production of 1.2 million barrels per day, more than many OPEC countries, according to Bloomberg. It would also expand Exxon’s availability of prime drilling locations in the basin by decades, providing low-cost, low-risk crude oil well beyond 2050 to feed its giant Gulf Coast refinery network.
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