Blame game: Biden walks out to speak in the South Court auditorium at the White House in Washington. The US president’s administration has been critical of Exxon for not raising production despite its record earnings. — AP
WASHINGTON: The White House may have blamed Exxon Mobil for high energy prices taking their toll on consumers, but will struggle to thwart the top US oil producer’s contemplated US$60bil acquisition of Pioneer Natural Resources, five antitrust lawyers and experts say.
Deal negotiations between Exxon and Pioneer are advanced but have not yet led to an agreement, Reuters reported last Thursday.
The acquisition would give Exxon ownership of the largest producer in the biggest US oilfield.
US president Joe Biden has blasted energy companies for their surging profits as petrol prices soared at the pump, and his administration has been especially critical of Exxon for not raising production despite its record earnings.
The White House wrote to Federal Trade Commission (FTC) chairperson Lina Khan in 2021 asking her to scrutinise deals in the sector for “anti-consumer behaviour,” and the antitrust regulator subsequently slowed down the approval of many of them as it reviewed them.
These transactions were eventually allowed to be completed, and the regulator has not sued to thwart an oil and gas production deal since 2000.
The lawyers and experts interviewed said the FTC would face an uphill struggle in challenging Exxon’s attempted acquisition of Pioneer.
This is because oil and gas companies have been effective in arguing that US mergers alone cannot stifle competition, as commodity prices are dictated by supply and demand forces in a vast global market.
Andre Barlow, an antitrust attorney with Doyle, Barlow and Mazard PLLC, said oil and gas deals such as that for Pioneer, which involve production and exploration, are easier to defend under antitrust law.
“This isn’t a refinery deal or a retail deal, which are usually the main drivers of antitrust risk. Those are the deals where we see problems,” Barlow said.
The White House and FTC declined to comment. Exxon and Pioneer did not respond to requests for comment.
Political pressure was building on the FTC last Friday to investigate any agreement that Exxon and Pioneer reached.
Democratic Senator Sheldon Whitehouse criticised Exxon for deploying money it earned from “gouging consumers, using a corrupt international cartel – to double down on polluting the planet, pushing even more costs and dangers on consumers”.
The antitrust experts agreed that, while Exxon and Pioneer stood a good chance of completing their deal, they would face a long antitrust review because of the controversy it will attract.
“The modern US experience is that oil and gas deals of any notable size get a close look. Petrol prices are creeping up and that will make a difference,” said William Kovacic, a former FTC chair who teaches at George Washington University’s law school.
Companies like Exxon have felt emboldened to pursue big mergers after US regulators lost some high-profile attempts in court to block mega-deals in recent months, including Microsoft’s US$69bil purchase of Call of Duty maker Activision Blizzard.
The FTC has not challenged a major merger of oil and gas producers since BP’s US$27bil acquisition of Atlantic Richfield in 2000.
It sued to block the merger before it agreed to drop its objections after BP offered to divest oil production acreage in Alaska.
Exxon’s deal for Pioneer would make it the biggest producer in the Permian basin, which spans West Texas and eastern New Mexico, according to consultancies Wood MacKenzie and Rystad.
Pioneer is the Permian’s largest operator accounting for 9% of gross production, while Exxon occupies the No 5 spot at 6%, according to RBC Capital Markets analysts.
The FTC earlier this year showed tolerance for consolidation in another US oil field.
It allowed Chevron, the No 2 US oil producer, to complete in August its US$7.6bil acquisition of PDC Energy, less than three months after the deal was announced, even as it concentrated 40% of the production in the Denver-Julesburg basin.
That is more consolidation than the Exxon-Pioneer deal would bring to the Permian basin.
It could not be learned how long Exxon and Pioneer plan to give themselves to complete their deal or whether the latter will negotiate a hefty break-up fee to allow for the possibility that regulators thwart their tie-up. — Reuters
