[1/2]Scott Sheffield, chairman and chief executive officer of Pioneer Natural Resources Company, speaks to guests and investors during the OGIS conference for mid-sized and small-scale oil and gas companies in New York April 8, 2014. Portal/Eduardo Munoz/File Photo Purchase License Rights
HOUSTON, Oct 16 (Portal) – Four years ago, Texas oil major Scott Sheffield saw major oil companies aggressively moving into the top U.S. shale basin and planned to sell his then $24 billion Pioneer Natural Resources (PXD .N) to make the oil field’s biggest profit.
The CEO concentrated the business, divested itself of less productive properties, and divested itself of an internal service division. His goal was to make Pioneer the leanest, most profitable and most desirable catch among independent U.S. shale oil companies.
Sheffield emerged as a shale statesman who encouraged the U.S. to lift a 40-year ban on U.S. crude exports and snap up competitors while publicly warning of impending consolidation.
On October 11, the 71-year-old’s mission paid off when oil giant Exxon Mobil (XOM.N) offered $59.5 billion for the oil and gas company – more than double its 2019 value.
“Pioneer was in the position of predator and prey,” said Dan Pickering, a longtime shale investor and head of investment firm Pickering Energy Partners. “He thought several steps ahead.”
TEHRAN HIGH SCHOOL
Oil is in the family’s blood. Sheffield’s father was an Atlantic Richfield Co. executive who brought his family to Iran, where Sheffield spent his high school years. He developed a strong desire to win as a quarterback on the American football team at his Tehran school, said son Bryan Sheffield.
“Scott is a big competitor. That’s what drives him. It’s about being competitive with your competition,” said the younger Sheffield, one of five siblings and co-managing director of investment firm Formentera Partners.
After college, Sheffield worked for Amoco Corp. and later joined his father-in-law’s oil company and became CEO five years later. This company would become Pioneer Natural Resources.
It grew from a small, $30 million family-owned business in West Texas to one of the largest after merging with corporate raider Boone Pickens’ Mesa Energy in 1997 and later discovering shale oil hidden beneath its acreage.
Sheffield retired two decades later but returned as CEO in 2019 after the company overspent and overpromised investors.
Upon his return, he focused exclusively on Permian petroleum: natural gas processing, oil field services and shale operations in South Texas. They generated around a billion US dollars in cash to buy up competitors.
He also embraced an emerging philosophy that prioritized shareholder returns over rapid production increases and opposed a plan to more than quadruple Pioneer’s oil production by 2026.
“The big change is to treat capital as important as production,” he told investors in his first earnings report as he regained control of the company.
Sheffield could not be reached for comment for this article.
READ TEA LEAVES
Daniel Yergin, economic historian and author of “The New Map,” about U.S. shale’s influence on global markets, said Sheffield is a forward-looking reader of industry trends.
“It’s receiving signals,” Yergin said.
Two of Sheffield’s most significant findings were the important role technology would play in reshaping U.S. oil production and the realization that big oil companies would ultimately control the Permian, he said.
In comments after the deal was announced, Sheffield and Exxon CEO Darren Woods said they had agreed to the terms of a sale two weeks after the two first met to negotiate.
Sheffield has long represented Pioneer and other shale oil companies needed “size and scale” to survive the next downturn, as many oil companies have been wiped out by OPEC price wars over the years.
He made the company more attractive by buying up his son’s DoublePoint Energy and Parsley Energy for a combined $11 billion as the COVID-19 oil crash drove stock prices lower.
The strategy of cutting production to increase shareholder returns has not been well received by those who believe it has diminished the U.S. role in oil markets.
“I was frustrated by the extent to which he tried to suggest to the U.S. oil and gas sector that it needed to adopt his unique brand of discipline across the board,” said Doug Sheridan, managing director of research firm EnergyPoint Research.
SALE WINNER
Sheffield is one of the biggest winners from the deal. He will receive a $29 million severance package, about $100 million in Exxon stock and a seat on Exxon’s board after the sale closes next year.
Its bluntness and reputation for photographic memory could clash with Exxon’s insular culture.
“He’s willing to stand up and say what he believes and willing to talk to anyone on the world stage,” said Bruce Vincent, a former president of Swift Energy who has known Sheffield for more than 30 years.
Pioneer employees were occasionally hesitant to give him predictions because they knew Sheffield would remember them and question them later if the result didn’t match, a former employee said.
He will have to curb his outspokenness to remain on the Exxon board, said his son Bryan.
“I don’t think he can be open. That would be taboo as a board member,” he said.
Reporting by Arathy Somasekhar in Houston; Edited by Gary McWilliams and Marguerita Choy
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