Record $5.6M Penalty For HSR Act Violations in Verdun Oil Acquisition

The Fried Frank firm reports that Verdun Oil Company and XCL Resources agreed to pay a record $5.6 million civil penalty to resolve allegations of violating the Hart-Scott-Rodino (HSR) Act. The Department of Justice (DOJ) claimed the companies improperly assumed operational control of EP Energy before the HSR Act waiting period ended. The HSR Act mandates that buyers refrain from managing a target’s business before the waiting period expires, with penalties for violations reaching up to $51,744 per day. This enforcement action highlights the need for companies to carefully structure interim operating covenants in purchase agreements and ensure compliance during the pre-closing phase.

Case History

In 2021, Verdun agreed to acquire EP Energy’s oil and gas operations in Texas and Utah for $1.4 billion. EP competed with Verdun in the Eagle Ford Shale and with XCL, Verdun’s sister company, in Utah’s Uinta Basin. Following an in-depth investigation, the Federal Trade Commission (FTC) required Verdun to divest EP’s Utah operations in a September 2022 consent decree. In January 2025, the DOJ filed a complaint alleging that Verdun and XCL violated the HSR Act by assuming control over EP’s operations through provisions in the purchase agreement and subsequent actions taken before the waiting period expired.

The Court’s Ruling

The DOJ alleged that Verdun and XCL halted EP’s drilling activities, directed customer communications, required approval for significant expenditures, and coordinated pricing and contract changes. Additionally, EP shared sensitive competitive information without safeguards. After the investigation began, the parties amended their agreement to prevent further violations.

Takeaways for In-House Counsel

This case underscores the importance of maintaining strict compliance with HSR Act requirements. Pre-closing agreements and actions that grant buyers operational control can trigger scrutiny, delay regulatory approvals, and result in significant penalties. Counsel should ensure that purchase agreements include narrowly tailored interim covenants and maintain operational separation until the HSR waiting period concludes.