US FTC slaps fine on oil producers for gun-jumping deal

The US Federal Trade Commission (FTC) issued a record $5.6 million civil penalty on oil producers XCL Resources Holdings, Verdun Oil Co., and EP Energy LLC, Jan. 7, 2025, to settle allegations they gun-jumped, or engaged in illegal pre-merger coordination, in violation of antitrust laws.

Verdun, which was under common management with XCL at the time of the July 2021 transaction, agreed to acquire EP in a $1.4-billion transaction that was subject to a waiting period before completion.

EP almost immediately allowed XCL and Verdun to assume operational and decision-making control over significant aspects of EP’s day-to-day business operations before the transaction closed, the FTC complaint states.

The FTC alleged that EP coordinated prices for EP’s customers in the Eagle Ford region of Texas. "This led to a crude oil supply shortage for EP when the US market was facing significant supply shortages and multi-year highs in oil prices, resulting in Americans paying skyrocketing prices at the pump," the complaint states.

The companies' gun-jumping activities lasted from July 2021 to October 2021, when they executed an amendment to the purchase agreement that allowed EP to operate independently again without XCL's or Verdun’s control, the complaint said.

The civil penalty settlement reached with XCL, Verdun, and EP provides for the largest dollar penalty ever imposed in the US for such a violation, the FTC said.

During its investigation of the acquisition agreement, the FTC found "significant competitive concerns given that the deal, originally structured, would have eliminated head-to-head competition between two of only four significant energy producers and would have harmed competition for the sale of Uinta Basin waxy crude oil to Salt Lake City refiners." 

The FTC allowed the deal to go through after it reached a consent agreement with XCL, Verdun, and EP in March 2022 that required the divestiture of EP’s entire business and assets in Utah.