Exxon buying Pioneer will trigger $71 million in executive windfalls

By David French

NEW YORK (Reuters) -Senior management at Pioneer Natural Resources (NYSE:) will likely be out of a job once the company’s $60 billion sale to Exxon Mobil (NYSE:) is completed, but the top brass will walk away with bumper payouts which were sweetened further earlier this year.

The top five executives at the U.S. shale operator are set to share $71 million in severance payouts, with Chief Executive Scott Sheffield on track to receive around $29 million, a review of regulatory filings and Reuters calculations show.

The award to Sheffield, who helped found the shale producer over two decades ago and was slated to retire at the end of 2023, represents a sum worth three times his base salary as well as all his pending equity awards for performance. Those will come due when the sale closes, expected next year.

Sheffield is one of the few Pioneer executives who will have a post-deal role – he is set to join Exxon’s board.

Pioneer did not respond to a request for comment.

Known as golden parachutes, such payments are commonplace in corporate America and are intended to incentivize management to sell a company even if it means ending their own employment.

However, the size of the awards often stir controversy, especially if they are considered superior to benefits given to regular staff who face similar job uncertainty. Changes to pay packages that make executive compensation more lucrative in proximity to a sale announcement can also raise eyebrows.

In Pioneer’s case, per a filing from April citing changes made in “early 2023,” executives would receive benefits including an additional payment matching contributions towards retirement funds and extended healthcare coverage.

Pioneer said in a letter to staff on Wednesday, a copy of which was seen by Reuters, that all oilfield employees, as well as most office workers, will be offered roles within the combined company.

The expected payouts do not count whatever Pioneer stock management owns and will be acquired as part of the Exxon deal. Sheffield’s family trust owns stock worth around $104 million, while Richard Dealy – who had been in line to succeed Sheffield as CEO, but will now head the transition team at Pioneer – has shares worth roughly $39 million, regulatory filings show.

Exxon’s acquisition of Pioneer will be paid for using new Exxon shares, meaning shares in Pioneer owned by management will be replaced by Exxon stock. It was unclear whether management would have any restrictions on when they could sell the Exxon stock they would ultimately own.

Change-in-control payouts, as the incentives are formally known, have taken on added purpose in the oil and gas sector. Unlike other sectors such as technology, the industry has fewer new companies being created as more people question the lifespan of fossil fuels.

Some in the industry, including investment firm Kimmeridge Energy Management, have argued for larger payouts to overcome management teams becoming entrenched for lack of opportunity outside their current roles.

When smaller shale producer PDC Energy (NASDAQ:) was sold to Chevron (NYSE:) for $7.6 billion earlier this year, Chief Executive Bart Brookman was given a payout worth around $46 million. Denbury, which agreed a $4.9 billion sale to Exxon in July, is forecast to pay Chris Kendall around 10 times his $6.8 million salary in severance, though that figure is inflated by a generous compensation scheme that Denbury offered following its emergence from bankruptcy in 2020.