Hess facing three lawsuits over disclosures in Chevron deal

May 22, 2024 News

Chevron and Hess logos are seen in this illustration taken, October 23, 2023. REUTERS/Dado Ruvic/Illustration

Reuters – Oil producer Hess on Tuesday said it is currently facing three lawsuits alleging inadequate disclosures over its proposed sale to Chevron.

Chevron last October offered to acquire Hess in a move to gain a foothold in oil-rich Guyana’s lucrative offshore fields. However, the deal has been stalled due to a conflict with Exxon Mobil and pending regulatory approval by the Federal Trade Commission.

All three lawsuits seek to further delay or block the $53 billion deal. Hess shareholders are scheduled to vote on May 28 on the deal. The allegations regarding deficiency in disclosures “are without merit”, the company said in a securities filing on Tuesday, but added that it was voluntarily supplementing the proxy statement “to moot plaintiffs’ disclosure claims and to avoid nuisance, potential expense and delay”. In addition to these lawsuits, several purported stockholders of Hess have sent demand letters alleging similar deficiencies.

The fight over Guyana’s oil, between oil majors Chevron and ExxonMobil has since also triggered an investigation into their assets by two federal agencies in the United States of America. This much was reportedly recently by Forbes, which noted in its report that the assets of ExxonMobil and Chevron as well as other oil companies are currently being evaluated by the Securities and Exchange Commission, and the Federal Trade Commission because of climate related concerns and competition law.

This publication previously reported that, the two have been in a battle over Hess’ 30 percent stake in the Stabroek Block offshore Guyana – the centrepiece of Chevron’s deal for Hess Corporation. Chevron’s US$53 billion acquisition of Hess potentially 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.

On October 23, 2023 Chevron announced that it entered into a definitive agreement with Hess Corporation to acquire all of the outstanding shares of Hess in an all-stock transaction valued at $53 billion, or $171 per share based on Chevron’s closing price on October 20, 2023. Under the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. The total enterprise value, including debt, of the transaction is $60 billion.

Chevron had said the acquisition of Hess upgrades and diversifies Chevron’s already advantaged portfolio.

The oil company in making the announcement had noted, “The Stabroek block in Guyana is an extraordinary asset with industry leading cash margins and low carbon intensity that is expected to deliver production growth into the next decade.” To this end, it signaled, “The combined company is expected to grow production and free cash flow faster and for longer than Chevron’s current five-year guidance.” Chairman and Chief Executive Officer (CEO) of Chevron, Mike Wirth said the company is now positioned to strengthen its long-term performance and further enhance its “advantaged portfolio by adding world-class assets.”

Exxon however, is claiming a right of first refusal over Hess’ Guyana assets under a joint operating agreement that governs the Stabroek oil block, which is estimated to have 11 billion barrels of oil and gas. Exxon controls 45 percent of the Stabroek block, while Hess has a 30 percent stake and the China National Offshore Oil Corporation, or CNOOC, controlling the remaining 25 percent.

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Chevron, disclosures, Federal Trade Commission, Hess, lawsuits

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