FromJilislotWall Street news

The relationship between US regulators and the oil and gas industry has become more tense.

On Thursday, the Federal Trade Commission (FTC) accused Scott Sheffield (Sheffield), former president of Pioneer Natural Resources, a shale oil giant, of trying to "collude" with OPEC to raise energy prices "to provide protection for Vanguard's profits." At the expense of American families and businesses.

The allegations come against the backdrop of ExxonMobil Vanguard, the largest acquisition by the oil and gas industry in 20 years, on the same day that FTC announced approval of the acquisition.

As a result, the avant-garde accusation shocked the industry and was seen as targeting not only the executive personally, but also all possible acquisitions and the oil and gas industry as a whole. Some in the industry are even more concerned that regulators may have a broader crackdown before the November presidential election.

James Lucier, an analyst at Capital Alpha Partners, pointed out in a report to clients:

The impact of this problem extends far beyond Sheffield.

So far, FTC has not taken a hostile attitude towards mergers and acquisitions in the oil industry. But this policy of relative letting go is a thing of the past.

Any chief executive considering a merger will have to worry about being targeted like Sheffield.

The influence that FTC fears.

Under the current FTC chairman, Lina Khan (Lena Khan), appointed by Biden, FTC has taken a more aggressive approach to protecting competition and consumer rights.

In the past two weeks alone, it has banned non-compete provisions for employees and tried to block a $8.5 billion acquisition in the luxury industry through litigation, arguing that the deal "threatens consumers' right to affordable handbag competition".

In response to the ExxonMobil acquisition, FTC made a decision to approve ExxonMobil's acquisition vanguard on the precondition of banning Sheffield from joining the board of directors of the mega-company as expected in the merger agreement.

FTC's move is aimed at a senior figure in the American shale oil and gas revolution who has grown Pioneer into the largest oil producer in Texas over the past two decades and developed in vast Permian basins.

The charges focus on Sheffield's attempt to rein in production during COVID-19 's sharp fall in oil prices in early 2020, putting many US producers on the brink of bankruptcy, when Sheffield took the lead in urging Texas regulators to impose supply restrictions. and called on OPEC + members, including Saudi Arabia and Russia, to reduce production.

Vanguard responded that Sheffield, 71, who had experienced six industry downturns, had only "expressed concern aimed at raising awareness of the problem and encouraging state, federal and international governments to take action". Sheffield declined to be interviewed.

But FTC combed through hundreds of text messages and WhatsApp messages as well as public statements as he reviewed the ExxonMobil acquisition, saying he had "begun a series of efforts to co-ordinate production levels to keep production artificially low" and to "communicate directly between Permian basins and Opec competitors".

Mr FTC said having Sheffield on ExxonMobil's board could "enhance the influence of his public statements and the effect of his private contacts with OPEC".

One of the evidence cited by the agency was a dinner attended by Sheffield with other US manufacturers, hosted by the late OPEC Secretary General Mohamed Mohammed Barkindo in 2017. In recent years, such dinners have become a regular event in the industry, usually held during the annual CERAWeek energy conference in Houston.

Participants said the gatherings had grown closer in recent years as the memory of cartels' efforts to sink the US shale industry by injecting oil into the market faded. However, according to media reports, other participants in the dinner did not comment on the allegations.

Will the survey be extended to the whole industry?

Industry executives and analysts say Sheffield is paying the price for outspokenness and has fallen victim to FTC efforts to take a tough stance on the industry. One leading executive described the agency's approach as "a bit excessive".

Dan Pickering of Pickering Energy Partners, a consulting group, said:

There is no doubt that Sheffield has always been one of the spokesmen for the upstream oil industry in the United States, and it is clear that he has received some criticism for it.

Given the closely watched nature of the deal, they need to take some action. I think a lot of people who don't want the deal to be successful will protest loudly if it goes through without any modification.

There is a view that the Biden administration will do so out of concern about the impact of rising oil prices on the election. There are concerns in the industry that FTC will launch a broader, industry-wide investigation into so-called "collusion" before the election, given that FTC has collected a large number of documents and private communications from energy companies during the M & A boom.

In addition to the $60 billion Exxon-Vanguard deal, FTC issued a second request for information from at least four other pending acquisitions, with a total value of more than $100 billion, including:

Chevron (Chevron) and Hess (Hess)

Diamond back Energy (Diamondback Energy) and Endever Energy (Endeavor Energy)

Western Oil Company (Occidental) and CrownRock

Chesapeake Energy (Chesapeake Energy) and Southwest Energy (Southwestern Energy).

But so far, FTC has declined to comment on whether it will launch an extensive industry investigation into conspiracy allegations, according to media reports.

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