(Bloomberg) 鈥� The Federal Trade Commission鈥檚 allegations that shale trailblazer Scott Sheffield tried to collude with OPEC to prop up crude prices is unnerving U.S. oil executives pursuing more than $100 billion in deals.

While Thursday鈥檚 green light from the FTC for Exxon Mobil Corp.鈥檚 $60 billion takeover of Pioneer Natural Resources Co. provided some relief to an industry undergoing unprecedented consolidation, a key condition of the approval is triggering shockwaves.

Sheffield, Pioneer鈥檚 founder and a high-profile figure in the shale industry, has been barred from joining Exxon鈥檚 board, according to the agreement reached between the companies and the FTC. That represents a step-change for the U.S. antitrust agency, which in the past usually sought asset sales before assenting to deals, legal observers say.

鈥淚t鈥檚 definitely avant garde antitrust,鈥� said Jeffrey Oliver, a partner at law firm Baker Botts LLP and former FTC official. 鈥淚t鈥檚 way for them to appear tough on a deal that they couldn鈥檛 find a route to try and block on any other grounds.鈥�

Exxon closed its acquisition of Pioneer Friday. 

Chevron Corp., Occidental Petroleum Corp., Diamondback Energy Inc. and Chesapeake Energy Corp. are among the companies with pending transactions currently under FTC review. 

The notion of the FTC scrutinizing individual executives has some companies with pending deals reviewing their regulatory-review strategies, as they are uncertain what the agency could throw at them next, according to people familiar with current deals.

The FTC hasn鈥檛 sought to block an oil or gas deal outright in recent memory, preferring to reach settlements. Last year, the agency required a Quantum Energy Partners founder to give up a board seat on shale-gas driller EQT Corp. before it could proceed with an acquisition.

The FTC cited 鈥渧oluminous evidence鈥� that Sheffield, 71, sought to co-ordinate production levels across the U.S. shale sector and align the industry with the Organization of Petroleum Exporting Countries, with whom he communicated extensively in private messages and dinners. The agency also cited public comments in which Sheffield advocated production discipline among American peers. 

鈥楶redatory practices鈥�

In an 850-word rebuttal of the FTC allegations, Pioneer defended its co-founder, citing his role in driving U.S. crude-production growth. His efforts to encourage discipline among drillers was aimed at improving investor returns and steeling the shale sector against OPEC鈥檚 鈥減redatory practices,鈥� the company said. 

鈥淯ntil today, the FTC has taken non-adversarial stances against oil industry mergers,鈥� Jim Lucier, managing director at Capital Alpha Partners, wrote in a note to clients. 鈥淣ow that stance is different. We will be on the lookout for other consent decrees, based on dubious legal theories, to be applied to oil industry mergers.鈥�

The FTC鈥檚 decision comes agains a backdrop of hostility from Democratic lawmakers that accused oil executives of 鈥渄eception and doublespeak鈥� over climate change in an investigation in the House of Representatives this week. Liberal advocacy group Climate Power seized on the FTC move as evidence that Big Oil is 鈥減rice gouging consumers so that Americans pay more at the pump even after years of record profits.鈥�

13.1 million barrels

A positive note for the industry from the FTC ruling was its decision to define the oil market globally rather than a narrow, localized one that could have competition concerns. And on the whole, the agency hasn鈥檛 been seeking to outright block oil and gas transactions.

鈥淭he good news is, they鈥檙e not hamstringing these deals, not forcing divestments of assets, not doing anything that makes either party want to walk from a deal,鈥� said Dan Pickering, founder of Pickering Energy Partners. 鈥淯ltimately, the deals are moving ahead pretty much as the two parties envisioned when they struck the deals.鈥�

U.S. oil production is currently about 13.1 million barrels a day, close to record levels and 40% higher than OPEC leader Saudi Arabia. US crude output more than doubled in the past 15 years, a result of the shale-oil revolution that Sheffield helped champion. 

鈥淭his is the government trying to save some face 鈥� it鈥檚 irrelevant to the whole issue of antitrust,鈥� said Leo Mariani, managing director at Roth MKM. Through Sheffield鈥檚 50 years in the industry, 鈥渉e鈥檚 never really had issues where people thought he was engaging in anti-competitive behaviors,鈥� Mariani said. 

鈥淪o it鈥檚 silly,鈥� he added. 鈥淭his whole thing is just politics ultimately. In an election year it helps to be tough on Big Oil.鈥�

 

(Bloomberg) — The Federal Trade Commission’s allegations that shale trailblazer Scott Sheffield tried to collude with OPEC to prop up crude prices is unnerving U.S. oil executives pursuing more than $100 billion in deals.

While Thursday’s green light from the FTC for Exxon Mobil Corp.’s $60 billion takeover of Pioneer Natural Resources Co. provided some relief to an industry undergoing unprecedented consolidation, a key condition of the approval is triggering shockwaves.

Sheffield, Pioneer’s founder and a high-profile figure in the shale industry, has been barred from joining Exxon’s board, according to the agreement reached between the companies and the FTC. That represents a step-change for the U.S. antitrust agency, which in the past usually sought asset sales before assenting to deals, legal observers say.

“It’s definitely avant garde antitrust,” said Jeffrey Oliver, a partner at law firm Baker Botts LLP and former FTC official. “It’s way for them to appear tough on a deal that they couldn’t find a route to try and block on any other grounds.”

Exxon closed its acquisition of Pioneer Friday. 

Chevron Corp., Occidental Petroleum Corp., Diamondback Energy Inc. and Chesapeake Energy Corp. are among the companies with pending transactions currently under FTC review. 

The notion of the FTC scrutinizing individual executives has some companies with pending deals reviewing their regulatory-review strategies, as they are uncertain what the agency could throw at them next, according to people familiar with current deals.

The FTC hasn’t sought to block an oil or gas deal outright in recent memory, preferring to reach settlements. Last year, the agency required a Quantum Energy Partners founder to give up a board seat on shale-gas driller EQT Corp. before it could proceed with an acquisition.

The FTC cited “voluminous evidence” that Sheffield, 71, sought to co-ordinate production levels across the U.S. shale sector and align the industry with the Organization of Petroleum Exporting Countries, with whom he communicated extensively in private messages and dinners. The agency also cited public comments in which Sheffield advocated production discipline among American peers. 

‘Predatory practices’

In an 850-word rebuttal of the FTC allegations, Pioneer defended its co-founder, citing his role in driving U.S. crude-production growth. His efforts to encourage discipline among drillers was aimed at improving investor returns and steeling the shale sector against OPEC’s “predatory practices,” the company said. 

“Until today, the FTC has taken non-adversarial stances against oil industry mergers,” Jim Lucier, managing director at Capital Alpha Partners, wrote in a note to clients. “Now that stance is different. We will be on the lookout for other consent decrees, based on dubious legal theories, to be applied to oil industry mergers.”

The FTC’s decision comes agains a backdrop of hostility from Democratic lawmakers that accused oil executives of “deception and doublespeak” over climate change in an investigation in the House of Representatives this week. Liberal advocacy group Climate Power seized on the FTC move as evidence that Big Oil is “price gouging consumers so that Americans pay more at the pump even after years of record profits.”

13.1 million barrels

A positive note for the industry from the FTC ruling was its decision to define the oil market globally rather than a narrow, localized one that could have competition concerns. And on the whole, the agency hasn’t been seeking to outright block oil and gas transactions.

“The good news is, they’re not hamstringing these deals, not forcing divestments of assets, not doing anything that makes either party want to walk from a deal,” said Dan Pickering, founder of Pickering Energy Partners. “Ultimately, the deals are moving ahead pretty much as the two parties envisioned when they struck the deals.”

U.S. oil production is currently about 13.1 million barrels a day, close to record levels and 40% higher than OPEC leader Saudi Arabia. US crude output more than doubled in the past 15 years, a result of the shale-oil revolution that Sheffield helped champion. 

“This is the government trying to save some face — it’s irrelevant to the whole issue of antitrust,” said Leo Mariani, managing director at Roth MKM. Through Sheffield’s 50 years in the industry, “he’s never really had issues where people thought he was engaging in anti-competitive behaviors,” Mariani said. 

“So it’s silly,” he added. “This whole thing is just politics ultimately. In an election year it helps to be tough on Big Oil.”