As oil majors forged shale nets, Texas oilman Sheffield made Pioneer the prized catch

HOUSTON, Oct 16 (Reuters) – 4 years in the past, Texas oilman Scott Sheffield noticed the oil majors have been transferring aggressively into the highest U.S. shale basin and plotted to make his then-$24 billion Pioneer Pure Assets (PXD.N) the oilfield’s greatest prize.

The CEO concentrated the enterprise, exiting much less productive properties and dumping an in-house service arm, and set out a mission to make Pioneer the leanest, worthwhile and most fascinating catch amongst U.S. shale independents.

Sheffield emerged as a shale statesman, encouraging the U.S. to raise a 40-year ban on exports of U.S. crude oil and snatching up rivals whereas publicly warning of a coming consolidation.

On Oct. 11, the 71-year-old’s mission paid off as oil big Exxon Mobil (XOM.N) provided $59.5 billion for the oil and fuel agency – greater than twice its worth in 2019.

“Pioneer sat able of being a predator and prey, mentioned Dan Pickering, a long-time shale investor and head of funding agency Pickering Vitality Companions. “He was pondering a number of steps forward.”

TEHRAN HIGH SCHOOL

Oil runs within the household’s blood. Sheffield’s father was an Atlantic Richfield Co government who introduced his household to Iran the place Sheffield spent his highschool years. He developed a fierce want to win as quarterback on his Tehran college’s American soccer crew, mentioned son Bryan Sheffield.

“Scott is a big competitor. That is what drives him. It is about being aggressive along with his peer group,” mentioned the youthful Sheffield, one in every of 5 siblings and co-managing associate at funding agency Formentera Companions.

After school, Sheffield labored for Amoco Corp and later joined his father-in-law’s oil firm and have become CEO 5 years later. That firm would change into Pioneer Pure Assets.

It grew from a small, $30 million household enterprise in West Texas to one of many largest after combining with company raider Boone Pickens’ Mesa Vitality in 1997 and later discovering the shale oil hidden beneath its acreage.

Sheffield retired twenty years later however returned as CEO in 2019 after the corporate overspent and overpromised traders.

On his return, he made Permian oil its sole focus: placing pure fuel processing, oilfield providers and South Texas shale property on the block. These generated about $1 billion in money to purchase rivals.

He additionally embraced an rising philosophy that emphasised shareholder returns over speedy manufacturing features, rejecting a plan to greater than quadruple Pioneer’s oil manufacturing by 2026.

“The massive change is to deal with capital simply as essential as manufacturing,” he instructed traders in his first earnings report as resuming management of the corporate.

Sheffield was unavailable to remark for this text.

READING TEA LEAVES

Daniel Yergin, an financial historian and writer of “The New Map,” on the affect of U.S. shale on international markets, mentioned Sheffield was a prescient reader of trade developments.

“He picks up indicators,” mentioned Yergin.

Two of Sheffield’s most vital insights have been the key function expertise would play in reshaping U.S. oil manufacturing and the popularity that large oil corporations would ultimately management the Permian, he mentioned.

In feedback after the deal was disclosed, Sheffield and Exxon CEO Darren Woods mentioned they agreed to phrases of a sale two weeks after the pair first sat down to barter.

Sheffield lengthy espoused Pioneer and different shale corporations wanted “measurement and scale” to outlive the following downturn as many oil corporations have been worn out over time by OPEC worth wars.

He made the corporate extra enticing by bulking up with purchases of DoublePoint Vitality and his son’s Parsley Vitality for $11 billion mixed because the COVID-19 oil crash slashed inventory costs.

The technique of restraining manufacturing to spice up shareholder returns has not sat nicely with those that imagine it has diminished the U.S. function in oil markets.

“I’ve been pissed off on the extent to which he is tried to recommend the U.S. oil and fuel sector wanted to embrace his distinctive model of self-discipline throughout the board,” mentioned Doug Sheridan, managing director of analysis agency EnergyPoint Analysis.

SALE WINNERS

Sheffield is likely one of the deal’s greatest winners. He’ll obtain a $29 million severance bundle, about $100 million in Exxon shares, and get a seat on Exxon’s board after the sale concludes subsequent yr.

His bluntness and status for a photographic reminiscence might conflict with Exxon’s insular tradition.

“He is keen to face up and say what he believes and keen to go speak to anybody on the worldwide stage,” mentioned Bruce Vincent, former president of Swift Vitality, who has identified Sheffield for greater than 30 years.

Pioneer staff sometimes have been hesitant to present him projections figuring out Sheffield would keep in mind them and query them later if the end result didn’t match, mentioned a former worker.

He should rein in his outspokenness to stay on Exxon’s tight-lipped board, mentioned son Bryan.

“I do not assume he might be outspoken. That will be a no-no as a board member,” he mentioned.

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