Pioneer Reports Q1 Profit Decline Ahead of Exxon Takeover

Pioneer Natural Resources reported weaker financial results for the first quarter of the year on lower natural gas prices as the company prepares to merge with Exxon.

Higher costs also contributed to the weaker net result, Reuters said in a report on the news before the company released the numbers on its website.

Net profit came in at $1.1 billion for the period, which compared with $1.2 billion a year earlier, as the average price for the oil it produced rose but the price of gas fell substantially. The average price per barrel of Pioneer oil during the quarter stood at $76.86, which was up 2.3% on the year. However, the average price per thousand cubic feet of gas dropped 51% to $1.87.

The release of the first-quarter results came soon after news broke earlier this week that the Federal Trade Commission has greenlit Exxon’s $60-billion acquisition of the oil independent but on the condition of banning Scott Sheffield, Pioneer’s former chief executive, from joining the board of the new company.

The condition was based on allegations by the FTC that Sheffield was involved in an attempt to co-ordinate production cuts to lift oil prices, according to unnamed sources quoted by the Wall Street Journal.

Sheffield, according to the allegations, contacted other shale oil producers as well as companies from OPEC to try and coordinate a production policy that would have raised oil prices, thus benefiting Pioneer. The WSJ report mentioned “hundreds of messages to representatives of the Organization of the Petroleum Exporting Countries about market dynamics, including pricing and production levels.”

“Mr. Sheffield’s past conduct makes it crystal clear that he should be nowhere near Exxon’s boardroom," said the deputy director of the FTC’s Bureau of Competition, Kyle Mach, as quoted by Reuters.

Pioneer, for its part, said that its former chief executive had had "neither the intent nor an effect of his communications to circumvent the laws and principles protecting market competition."

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:

• Is Copper Heading to $15,000?
• Asian Oil Imports Dropped in April
• Large Crude Inventory Build Rocks Oil Prices