‘Bottom-Fishing’ Chevron Should Take Breakup Fee, Sheffield Says

(Bloomberg) -- Scott Sheffield, the founder and chief executive officer of shale producer Pioneer Natural Resources Co., thinks Chevron Corp. should take its $1 billion breakup fee and walk away from the Anadarko Petroleum Corp. deal.

Anadarko announced on Monday that its board had deemed a $38 billion rival offer by Occidental Petroleum Corp. to be "superior," leaving it up to Chevron to either raise its $33 billion proposal or give up on the transaction. Sheffield’s company, with a market capitalization of $24.9 billion, has been mentioned by analysts as a possible target for further consolidation in the Permian Basin, the world’s largest oil field.

“Chevron was bottom fishing,” Sheffield, 66, said in a phone interview Tuesday. “Anadarko was cheap,” he said. “They were given an opportunity to buy it cheap and they went in. I’m not sure who else is really cheap now.”

He said the best thing for Chevron’s “shareholder base is to collect the $1 billion and go by the wayside. I don’t think Chevron has to do something now, but eventually I think they will. That doesn’t mean they come to us or Concho or Diamondback,” he said, speaking of two other Permian shale companies. “Those are three best targets in the basins,” along with Parsley Energy Inc. -- “my son’s company.”

Pioneer’s Down Day

Sheffield spoke in a phone interview Tuesday after his company’s shares briefly dropped as much as 8.5 percent in response to him saying on an earnings conference call that “I didn’t come back to sell the company.” Sheffield had been serving as chairman of Pioneer until February, when he re-assumed day-to-day control.

Even though the stock closed down 5.3 percent for the day, it’s still up 13 percent this year, which is slightly above the 11 percent gain for the 29-member S&P 500 Energy Index. Anadarko has gained 73 percent this year on the back of the bidding war. Chevron and Occidental declined to comment on Sheffield’s remarks.

He clarified in the interview that he didn’t have a chance on the conference call to say that “If we ever do receive an offer, I’ll be the first to take it to the board and we’ll evaluate it and we’ll do what’s right for the shareholders.” But, he said, “I’ve got to run it like it’s going to be in existence for a long time.”

‘Drastic Action’

While he doesn’t see a rush in M&A activity in the next one to two years, Sheffield said the major oil companies will “all have to make acquisitions at some point in time, in the next five years. BP doesn’t have a big enough presence, ConocoPhillips doesn’t have a big enough presence.”

He also gave a warning to Occidental CEO Vicki Hollub: “She needs to deleverage significantly, she’s got to turn the stock around and let people know that her deal works.”

He pointed to a report that Occidental shareholder T. Rowe Price Group was looking to vote against the board in response to this transaction. “Her shareholders meeting is coming up soon. But the one next year is going to be more serious,” he said.

“She’s really got to take drastic action over the next 12 months to show that this deal at this price is worth it for Oxy shareholders.”

To contact the reporter on this story: Kevin Crowley in Houston at kcrowley1@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Tina Davis, David Marino

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