FTC’s attack on high-profile exec rattles oil industry, sparks concern over deals

Exxon Mobil (NYSE:XOM) completed its $60B takeover of Pioneer Natural Resources (PXD) this week, but its agreement with antitrust regulators not to add Scott Sheffield, Pioneer’s former head, to its board has sent shock waves through the U.S. oil industry, leaving insiders wondering how past comments could be scrutinized.

The Federal Trade Commission took the extraordinary step of preventing Sheffield from joining the board as planned in the merger deal, accusing the former CEO of leading a coordinated effort with OPEC and other U.S. oil companies to “keep production artificially low” and increase profits, pointing to meetings held over several years, including a series of dinners at the annual CERAWeek energy conference in Houston.

Among corporate CEOs who have attended the gatherings are Occidental Petroleum’s (OXY) Vicki Hollub, Devon Energy’s (DVN) Rick Muncrief, Chesapeake Energy’s (CHK) Nick Dell’Osso and John Hess of Hess (HES).

“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,” Pioneer (PXD) said, defending its former CEO as “a leading and internationally respected industry authority.”

Sheffield has been outspoken about his desire to move away from the boom-bust cycles that once plagued the U.S. oil business, and he became an advocate for prioritizing shareholder returns over production gains.

Industry executives and analysts say Sheffield is paying a price for being outspoken and is a casualty of an FTC effort to take a tough stance against the oil sector leading up to the presidential election.

“It’s way for [the Biden administration] to appear tough on a deal that they couldn’t find a route to try and block on any other grounds,” Baker Botts law firm partner and former FTC official Jeffrey Oliver told Bloomberg.

Others in the industry worry the FTC will initiate a broader, sector-wide inquiry into alleged collusion in the run-up to the election as it gathers documentation and private communications from energy firms involved in other deals.

The FTC has made second requests for information from companies in at least four other pending takeovers: Chevron (CVX) and Hess (HES), Diamondback Energy (FANG) and Endeavor Energy, Occidental (OXY) and CrownRock, and Chesapeake Energy (CHK) and Southwestern Energy (SWN).