Hess reviewing timeline for Chevron’s buyout after ExxonM moves to arbitration

Mar 11, 2024 News

Kaieteur News – Following ExxonMobil Corporation’s move to arbitration in relation to the dispute with Chevron over the lucrative Stabroek Block-Hess Corporation has announced that it is reviewing the timeline for its merger with that US oil major, CNBC has reported.

Chevron’s US$53 billion acquisition of Hess gives it access to Hess’ stake in the Stabroek Block and positions the oil major to profit from Guyana’s emergence as an oil powerhouse, boasting one of the world’s fastest-growing economies. However, Exxon initiated arbitration on Wednesday last to defend what it perceives as its right to submit a counteroffer for Hess’ Guyana assets under a joint operating agreement.

“We disagree with ExxonMobil’s interpretation of the agreement and are confident that our stance will prevail in arbitration,” Hess communicated to its employees via email on Wednesday. “In light of this development, we are reevaluating the projected timeline for legal closure and will furnish further details in our upcoming merger update,” Hess added.

Exxon operates all production in Guyana with a 45% stake in the consortium with Hess and China’s CNOOC as its minority partners. Last October, Chevron proposed to buy Hess largely to obtain the Guyana stake.

Initially set to conclude in the first half of 2024, the deal has faced delays, and is now anticipated to extend until mid-2024 as the Federal Trade Commission scrutinizes the agreement. According to a filing with the Securities and Exchange Commission, Chevron cautioned that arbitration over Hess’ Guyana assets might prolong the closure until October 2025.

Hess, alongside Exxon and China National Offshore Oil Corporation, forms part of a consortium operating the Stabroek oil block, boasting an estimated 11 billion barrels of oil and gas resources. With a 30% stake, Hess stands alongside Exxon, holding a 45% stake, and CNOOC with a 25% stake. In a recent filing, Chevron alerted investors that the merger with Hess would be terminated if an arbitration court determines Exxon’s right of first refusal. In such a scenario, Hess would remain an independent entity and retain its share in the Guyana assets, as per Chevron’s filing.

Chevron has consistently argued that the joint operating agreement does not apply to its merger with Hess. Exxon Senior Vice President Neil Chapman said Wednesday that the oil major is “extremely confident in our position that pre-emption rights exist in this contract.” Arbitration disputes can take up to six months to resolve, Chapman said.

Chapman indicated that Exxon could make a bid for Hess’ stake in the Stabroek block. “We believe there is opportunity value here, there is option value here,” Chapman said during an interview at a Morgan Stanley event. “If that transaction does not proceed, there is potential value down the road for ExxonMobil—that option value is really, really important.”

“It would be incomprehensible for us to say ‘well we’re not going to look at that value, we’re just going to let the transaction proceed,’” Chapman said. “You have a responsibility to shareholders.”

Hess said in the Wednesday email that “there is no possible scenario in which Exxon or CNOOC could acquire Hess’ interest in Guyana as a result of the Chevron-Hess transaction.”

According to Reuters, the arbitration case seeks to preserve Exxon’s right to acquire Hess’s 30% stake in the giant Stabroek offshore oil block. Guyana’s Stabroek Block, which is consider the largest oil discovery in decades, is the prize in Chevron’s bid for Hess. Exxon made clear for the first time, it would bid for the Hess’s Guyana properties if Chevron proceeds with its proposed $53 billion Hess purchase.

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clash, deal, Exxon, Hess, Stabroek Block

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