Exxon Set to Win FTC Approval for $60 Billion Pioneer Deal

(Bloomberg) -- The US Federal Trade Commission is poised to greenlight Exxon Mobil Corp.’s $60 billion purchase of Pioneer Natural Resources Co. after the companies agreed that Pioneer’s co-founder and former chief executive officer won’t join the board, according to people familiar with the matter.

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The FTC found evidence that Scott Sheffield sought to communicate with the Organization of the Petroleum Exporting Countries and others about oil pricing and output, according to one of the people, who asked not to be named because the information isn’t public.

Exxon and Pioneer declined to comment.

An announcement may come within days, the people said. The deal will make Exxon far and away the biggest oil and natural gas producer in the Permian Basin, North America’s largest US oil field.

Pioneer shares that had been down more than 2% on the day trimmed those losses and closed down 0.6%. Exxon fell 1.9%.

Sheffield was a leading advocate of government-mandated rationing of Texas oil production during the early-2020 crude market collapse that saw prices plunge into negative territory. 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.

Last month, Pioneer was among several oil companies named as defendants in a federal civil lawsuit in New Mexico that says the drillers colluded with OPEC to coordinate crude output. Sheffield, while not a defendant in the case, is named in the lawsuit.

Read more: OPEC-Style Limits for Oil-Rich Texas Divide Shale Industry

More than 50 lawmakers urged the FTC in March to increase scrutiny on concerns a $230 billion wave of consolidation in would increase energy prices for consumers, squeeze suppliers and suppress wages. Investors had feared the agency, which has become more aggressive under Chair Lina Khan, would stand in the way of several large deals, especially in an election year when the Biden administration is seeking to prove its climate credentials and contain gasoline prices.

Chevron Corp., Occidental Petroleum Corp. and Chesapeake Energy Corp. are among companies with large pending takeovers that are undergoing in-depth reviews before the FTC.

Oil executives claim the deals will benefit shareholders, consumers and the environment. Exxon Chief Executive Officer Darren Woods has said the Pioneer deal would lower its cost of production, making US barrels more competitive in the global market, and provide a strong platform for growth, which would ultimately benefit consumers. Exxon also pledged to reduce climate-warming emissions from Pioneer operations to net zero by 2035, accelerating the prior target by 15 years.

The Biden administration has frequently been at odds with the oil industry, but easing through what many executives see as necessary consolidation is likely to improve relations. With domestic crude prices up roughly 14% this year and tensions rising the Middle East, the administration is vulnerable to Republican attacks on measures that hurt the oil industry and raise fuel prices.

The Pioneer deal will combine two fast-growing Permian operations, lifting Exxon’s production in the basin to the equivalent of about 2 million barrels a day by 2027, up from about 600,000 last year.

--With assistance from Mitchell Ferman.

(Adds detail of lawsuit in the seventh paragraph. A previous version corrected a deck head to make clear Sheffield is Pioneer’s ex-CEO.)

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