(Oil & Gas 360) – The proposed $50 billion+ merger between Hess and Chevron is attracting the Federal Trade Commission’s (FTC) attention.
John Hess, CEO of the Hess Oil Company, is the latest oil and gas CEO to face Federal Trade Commission allegations involving what it contends were improper communications with the Organization of Petroleum Exporting Countries (OPEC).
The FTC contends that some of Hess’s interactions with OPEC could be in violation of antitrust laws relating to production and pricing. The FTC says Hess has a record of problematic communications with OPEC going back to 2016. The FTC says such communications could increase American consumers’ energy prices from potential collusion.
The FTC has approved the merger conditional on Hess being precluded from having a board seat or any advisory position with Chevron. He has been CEO of the company his father founded in 1933 for nearly 30 years.
Hess’ situation mirrors that of an earlier instance this year when the FTC approved an even bigger merger, this one involving Exxon’s acquisition of Pioneer Natural Resources for nearly $65 billion.
That approval was contingent on Pioneer CEO Tom Sheffield likewise being excluded from any board seat or advisory position with Exxon. The FTC cited what it says were Sheffield’s improper communications with OPEC for its condition for approval.
The Chevron-Hess merger has yet to close, a year after it was announced. It has been slowed not only by the FTC review but also by a legal challenge from Exxon, which contends it has the legal right from prior business dealings with Hess to compete for its share in a Guyana oil project that is included in Chevron’s bid for Hess.
In May, Occidental CEO Vicki Holub likewise asserted that the FTC exceeded its authority by investigating Oxy’s nearly $11 billion to acquire CrownRock; the deal was approved in August.
Some people within the industry contend the FTC is overreaching, noting that OPEC is a competitor and that business strategies between publicly traded companies such as Hess, Exxon, Chevron, and Pioneer are incompatible with the national oil company model of OPEC.
While the FTC does not have any legal authority to criminally prosecute any laws being broken, it can refer cases to the Department of Justice with its prosecutorial success rate of well over 95%.
Neither Hess nor Sheffield will be allowed at this time to rebut the FTC accusations or elaborate further on their behavior as part of the FTC’s approval of the two mergers.
By Jim Felton for oilandgas360.com
