FTC Approves Exxon's $60B Pioneer Deal but Bars Co-Founder from Board

The FTC has approved Exxon Mobil's $60 billion acquisition of Pioneer Natural Resources, but barred Pioneer's co-founder Scott Sheffield from joining Exxon's board due to allegations of oil price collusion with OPEC. The deal is expected to close this week, creating the dominant oil and gas producer in the Permian Basin.

author-image
Emmanuel Abara Benson
New Update
FTC Approves Exxon's $60B Pioneer Deal, Bars Co-Founder fromBoard

FTC Approves Exxon's $60B Pioneer Deal, Bars Co-Founder fromBoard

The US Federal Trade Commission (FTC) has given the green light to Exxon Mobil's approximately $60 billion acquisition of Pioneer Natural Resources,paving the wayfor the creation of the dominant oil and gas producer in the Permian Basin, the country's largest oil field.

However, the regulatory agency has imposed a significant condition on the deal: Pioneer's co-founder and former CEO, Scott Sheffield, will not be allowed to join Exxon's board of directors as a result of allegations of oil price collusion with the Organization of Petroleum Exporting Countries (OPEC).

Why this matters: The approval of thismega-merger has significant implications for the US energy landscape and global oil markets, potentially influencing production levels and pricing strategies. The FTC's scrutiny of the deal also highlights the agency's commitment to protecting consumers and promoting fair competition in the industry.

The FTC reached a consent agreement with Exxon on Wednesday, which will bar Sheffield from joining the Exxon board. The agency accused Sheffield of attempting to communicate with OPEC representatives and officials about oil pricing, production, and market dynamics, potentially driving up costs for consumers. According to the FTC complaint, Sheffield exchanged hundreds of text messages with OPEC officials, discussing crude oil market dynamics, pricing, and output.

"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. "American consumers shouldn't pay unfair prices at the pump simply to pad a corporate executive's pocketbook." The FTC's order aims to prevent Sheffield from engaging in collusive activity that could drive up crude prices and force US consumers to pay higher fuel prices.

Pioneer Natural Resources has refuted the commission's accusations, stating that Sheffield never sought to collude with other oil producers and that his communications were aimed at promoting market competition. Exxon, which learned about the allegations from the FTC, stated that they are "entirely inconsistent with how we do business." The oil giant has agreed not to add Sheffield to its board and expects the deal to close as early as this week.

The acquisition, announced in October as an all-stock transaction valued at $59.5 billion, is expected to transform Exxon's upstream portfolio. Exxon chairman and CEO Darren Woods stated, "Pioneer is a clear leader in the Permian with a unique asset base and people with deep industry knowledge. The combined capabilities of our two companies will provide long-term value creation well in excess of what either company is capable of doing on a standalone basis."

The deal comes while the oil and gas industry is experiencing a resurgence, with advances in horizontal drilling and fracking technologies yielding more efficient oil wells in the US. The Energy Information Administration reported that the rig count has plummeted, but oil production remains strong. The Permian Basin, located in Texas and New Mexico, is the country's largest oil field, and Pioneer is the biggest producer in the region.

The FTC's decision to block Sheffield from joining Exxon's board eases concerns that the Biden administration would block a series of oil and natural gas mega-mergers. However, the agency's aggressive review of upstream oil and gas deals since last year, including Diamondback Energy's $26 billion merger with Endeavor Energy Resources and Chesapeake Energy's $7.4 billion merger with Southwestern Energy, highlights its commitment to protecting consumers and promoting fair competition in the industry.

Exxon-Pioneer deal moves forward, and the implications for the US energy sector and global oil markets remain significant. The combined company's dominant position in the Permian Basin could potentially influence production levels and pricing strategies. While the FTC's condition on Sheffield's involvement aims to mitigate the risk of anti-competitive practices, the long-term impact of the merger on consumers and the industry as a whole will be closely watched by regulators, industry experts, and the public alike.

Key Takeaways

  • The FTC approved Exxon's $60 billion acquisition of Pioneer Natural Resources.
  • But one of the conditions is that Scott Sheffield can't join Exxon's board due to OPEC collusion allegations.
  • The deal creates a dominant oil and gas producer in the Permian Basin.
  • FTC aims to protect consumers and promote fair competition in the industry.
  • Merge could influence production levels and pricing strategies in US energy sector.