US Oil Industry Expansion Accelerates... "ExxonMobil M&A Conditionally Approved"

U.S. competition authorities are expected to conditionally approve the mega merger and acquisition (M&A) of ExxonMobil, the country's largest energy company. If the antitrust investigation into ExxonMobil, which led last year's industry consolidation boom, concludes without major surprises, it is anticipated that other companies' acquisition deals will also accelerate.

On the 1st (local time), the Wall Street Journal (WSJ), citing sources, reported that “the U.S. Federal Trade Commission (FTC) is set to approve ExxonMobil's acquisition of Pioneer Natural Resources on the condition that former Pioneer CEO Scott Sheffield does not join ExxonMobil's board.”

ExxonMobil announced in October last year that it would acquire Pioneer for $60 billion, and the FTC has been conducting an antitrust investigation since the end of the year. The FTC is expected to officially communicate its conditional approval policy to ExxonMobil later this week, requiring the exclusion of former CEO Sheffield from the board.

Currently, the FTC believes that former Pioneer CEO Sheffield was involved in collusive activities that could raise oil prices. They have identified that Sheffield sent hundreds of messages related to oil market matters such as pricing and production volumes to representatives of the Organization of the Petroleum Exporting Countries (OPEC).

ExxonMobil is also reported to have agreed to exclude former CEO Sheffield from the board. Upon submission of the agreement, ExxonMobil's acquisition process is expected to conclude within days. An ExxonMobil spokesperson stated, "We are conducting a very thorough review with the FTC and continue to maintain constructive cooperation."

ExxonMobil's acquisition of Pioneer is expected to be the largest mega deal in the fossil fuel industry since the late 1990s. Through this acquisition, ExxonMobil aims to strengthen its control over the Midland oil field in the Permian Basin located in West Texas.

This acquisition also triggered a wave of M&A activity within the industry last year. Following ExxonMobil's announcement, Chevron acquired Hess for $53 billion, and Occidental Petroleum acquired CrownRock for $10.8 billion at the end of last year. In January of this year, Chesapeake announced it would purchase Southwestern Energy for $7.4 billion.

In this context, the FTC is reported to have requested additional information for antitrust investigations from these companies as well. However, major foreign media outlets, citing antitrust experts, reported that “since these are mergers between producers rather than refiners or retailers, it is expected to be difficult for the FTC to block them.”

Bloomberg News analyzed that although the Biden administration has frequently clashed with the fossil fuel industry, if these industry M&As are completed, relations are likely to improve. This is because such consolidation within the industry could lower crude oil production costs, acting as a factor for oil price declines. International oil prices have recently stalled as the escalation crisis between Israel and Iran has eased, but due to geopolitical risks originating from the Middle East, prices have risen by about 10% since the beginning of this year.