© Reuters. FILE PHOTO: Scott Sheffield, Chairman and Chief Executive Officer of Pioneer Natural Resources Company, speaks to guests and investors during the OGIS conference for mid- and small-tier oil and gas companies in New York, April 8, 2014. REUTERS/Eduardo Mu
By Arathy Somasekhar
HOUSTON (Reuters) – Four years ago, Texas oilman Scott Sheffield saw the oil majors were moving aggressively into the top U.S. shale basin and plotted to make his then-$24 billion Pioneer Natural Resources (NYSE:) the oilfield’s biggest prize.
The CEO concentrated the business, exiting less productive properties and dumping an in-house service arm, and set out a mission to make Pioneer the leanest, profitable and most desirable catch among U.S. shale independents.
Sheffield emerged as a shale statesman, encouraging the U.S. to lift a 40-year ban on exports of oil and snatching up rivals while publicly warning of a coming consolidation.
On Oct. 11, the 71-year-old’s mission paid off as oil giant Exxon Mobil (NYSE:) offered $59.5 billion for the oil and gas firm – more than twice its value in 2019.
“Pioneer sat in a position of being a predator and prey, said Dan Pickering, a long-time shale investor and head of investment firm Pickering Energy Partners. “He was thinking multiple steps ahead.”
TEHRAN HIGH SCHOOL
Oil runs 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 fierce desire to win as quarterback on his Tehran school’s American football team, said son Bryan Sheffield.
“Scott is a huge competitor. That’s what drives him. It’s about being competitive with his peer group,” said the younger Sheffield, one of five siblings and co-managing partner at 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. That company would become Pioneer Natural Resources.
It grew from a small, $30 million family business in West Texas to one of the largest after combining with corporate raider Boone Pickens’ Mesa Energy in 1997 and later discovering the shale oil hidden below its acreage.
Sheffield retired two decades later but returned as CEO in 2019 after the company overspent and overpromised investors.
On his return, he made Permian oil its sole focus: putting processing, oilfield services and South Texas shale assets on the block. Those generated about $1 billion in cash to buy rivals.
He also embraced an emerging philosophy that emphasized shareholder returns over rapid production gains, rejecting a plan to more than quadruple Pioneer’s oil production by 2026.
“The big change is to treat capital just as important as production,” he told investors in his first earnings report as resuming control of the company.
Sheffield was unavailable to comment for this article.
READING TEA LEAVES
Daniel Yergin, an economic historian and author of “The New Map,” on the influence of U.S. shale on global markets, said Sheffield was a prescient reader of industry trends.
“He picks up signals,” said Yergin.
Two of Sheffield’s most significant insights were the major role technology would play in reshaping U.S. oil production and the recognition that big oil companies would eventually control the Permian, he said.
In comments after the deal was disclosed, Sheffield and Exxon CEO Darren Woods said they agreed to terms of a sale two weeks after the pair first sat down to negotiate.
Sheffield long espoused Pioneer and other shale firms needed “size and scale” to survive the next downturn as many oil companies have been wiped out over the years by OPEC price wars.
He made the company more attractive by bulking up with purchases of DoublePoint Energy and his son’s Parsley Energy (NYSE:) for $11 billion combined as the COVID-19 oil crash slashed stock prices.
The strategy of restraining production to boost shareholder returns has not sat well with those who believe it has diminished the U.S. role in oil markets.
“I have been frustrated at the extent to which he’s tried to suggest the U.S. oil and gas sector needed to embrace his unique brand of discipline across the board,” said Doug Sheridan, managing director of research firm EnergyPoint Research.
Sheffield is one of the deal’s biggest winners. He will receive a $29 million severance package, about $100 million in Exxon shares, and get a seat on Exxon’s board after the sale concludes next year.
His bluntness and reputation for a photographic memory may clash with Exxon’s insular culture.
“He’s willing to stand up and say what he believes and willing to go talk to anyone on the global stage,” said Bruce Vincent, former president of Swift Energy, who has known Sheffield for more than 30 years.
Pioneer employees occasionally were hesitant to give him projections knowing Sheffield would remember them and question them later if the outcome did not match, said a former employee.
He will have to rein in his outspokenness to remain on Exxon’s tight-lipped board, said son Bryan.
“I don’t think he can be outspoken. That would be a no-no as a board member,” he said.
Oil prices steady on OPEC+ cut uncertainty and Middle East tension
© Reuters. FILE PHOTO: An aerial view shows tugboats helping a crude oil tanker to berth at an oil terminal, off Waidiao Island in Zhoushan, Zhejiang province, China July 18, 2022. cnsphoto via REUTERS/File Photo
By Natalie Grover
London (Reuters) -Oil prices were little changed on Tuesday against a backdrop of uncertainty over voluntary output cuts by the OPEC+ group of producers, tensions in the Middle East and some encouraging economic signals in Europe.
futures edged down by 25 cents, or 0.3%, to $77.78 a barrel by 1301 GMT. U.S. West Texas Intermediate crude futures lost 21 cents, or 0.3%, to $72.83.
Comments by Saudi Arabia’s energy minister that OPEC+ production cuts could continue past the first quarter of 2024 lent some price support, said OANDA analyst Kelvin Wong.
Oil prices had declined on Monday on doubts that OPEC+ supply cuts would have a significant impact, said CMC Markets (LON:) analyst Tina Teng.
On Tuesday, however, the Kremlin said that the cuts agreed by the OPEC+ group will take time to kick in.
The Organization of the Petroleum Exporting Countries and allies including Russia, together known as OPEC+, agreed on Thursday to voluntary output cuts of about 2.2 million barrels per day (bpd) for the first quarter of 2024.
At least 1.3 million bpd of those cuts, however, were an extension of voluntary curbs that Saudi Arabia and Russia already had in place.
The additional cuts were below the 1 million bpd reduction that was already baked into market expectations in the run-up to the OPEC+ meeting, FGE analysts wrote in a note, adding that in practice they expect the overall OPEC+ cut to be closer to 500,000 bpd more than the reductions to fourth-quarter output.
Meanwhile, the resumption of fighting in the Israel-Hamas war has stoked supply concerns, as did attacks on three commercial vessels in international waters in the southern Red Sea.
There was a bright spot on the demand side, with European Central Bank board member Isabel Schnabel telling Reuters the bank can take further interest rate hikes off the table after a “remarkable” fall in inflation.
In the United States, however, data on Tuesday showed factory orders fell by more than analysts had expected in October and the most in more than three years, raising concerns about the health of U.S. demand.
That bolstered the view that increases to interest rates are beginning to limit spending, analysts said.
Oil falls on demand fears and doubts over OPEC+ cuts
© Reuters. FILE PHOTO: An aerial view shows a crude oil tanker at an oil terminal off Waidiao island in Zhoushan, Zhejiang province, China January 4, 2023. China Daily via REUTERS
By Alex Lawler
LONDON (Reuters) – Oil prices extended declines on Monday, pressured by investor scepticism over the latest OPEC+ decision on supply cuts and uncertainty surrounding global fuel demand, though the risk of supply disruptions from the Middle East conflict limited losses.
Monday’s fall adds to a 2% decline last week after the supply cuts announced on Thursday by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, together known as OPEC+.
futures were down 45 cents, or 0.6%, at $78.43 a barrel by 1243 GMT. U.S. West Texas Intermediate crude futures fell 43 cents, or 0.6%, to $73.64.
“Crude seems to be under continued pressure from the OPEC+ decision,” said Vandana Hari, founder of oil market analysis provider Vanda (NASDAQ:) Insights.
The OPEC+ cuts were voluntary in nature, raising doubts about whether or not producers would fully implement them. Investors were also unsure about how the cuts would be measured.
“The OPEC+ ‘deal’ last week was unconvincing to say the least,” said Craig Erlam, analyst at brokerage OANDA. “And with markets seemingly anticipating more of an economic slowdown next year, the announcement simply doesn’t go far enough.”
Surveys on Friday showed global manufacturing activity remained weak in November on soft demand, with euro zone factory activity contracting, while there were mixed signs on the strength of China’s economy.
Geopolitical considerations were back in focus as fighting resumed in Gaza, lending some support to prices. Three commercial vessels came under attack in international waters in the southern Red Sea, the U.S. military said on Sunday.
Elsewhere, Western countries have stepped up efforts to enforce the $60 a barrel price cap on seaborne shipments of Russian oil imposed to punish Moscow for its war in Ukraine.
Washington on Friday imposed additional sanctions on three entities and three oil tankers.
Gold prices hit record high on bets of early Fed rate cuts
Investing.com — Gold prices touched an all-time high on Monday, but later pared back some of these gains, as traders bet on the potential for a Federal Reserve interest rate cut next year.
By 07:26 ET (12:26 GMT), was mostly unchanged at $2,071.29 a troy ounce, retreating slightly from an earlier rally that had lifted the typical safe haven asset to a record $2,135 per troy ounce. Gold posted strong gains last week, and also rose for a second consecutive month in November.
The yellow metal has appreciated sharply in recent sessions as easing inflation, soft labor market data, and less-hawkish signals from the Fed bolstered speculation that the bank will bring down borrowing costs from a more than two-decade peak in 2024.
Near-term demand for gold was also fueled by an attack on an American warship and commercial vessels in the Red Sea, which ramped up concerns over an escalation in the violence in the Middle East.
Speaking on Friday, Fed Chair Jerome Powell reiterated his stance that U.S. rates will remain higher for longer. But some changes in his language — particularly an acknowledgement of progress made towards curbing inflation and the potential for a “soft landing” for the U.S. economy — reinforced expectations that the Fed will no longer hike rates in December and possibly begin cutting them by March 2024.
More economic cues on tap this week
shows an almost 97% chance that the Fed will keep rates on hold at a range of 5.25% to 5.50% when policymakers meet later this month. Meanwhile, there is a more than 50% probability that the central bank will trim rates by 25 basis points as soon as March of next year, up from around 21% one week ago.
The prospect of falling borrowing costs bodes well for gold, given that elevated rates push up the opportunity cost of investing in non-interest bearing assets like the metal. This notion had battered bullion prices over the past year.
But markets still have a slew of economic figures to assess. data for November — a key gauge of the labor market — is due later this week, while inflation readings for the remainder of the year are also slated for release in the coming weeks.
Some facets of the labor market remain strong, while inflation is still comfortably above the Fed’s 2% target — a trend that, if persistent, may diminish the chances of an early rate cut.
Ambar Warrick contributed to this report.
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