ExxonM and Chevon’s fight over oil-rich Stabroek Block drags on

Aug 02, 2024 News

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…as Hess suffers worst shares drop in 20 months over delays

Kaieteur News – Chevron and Exxon are headed to a May arbitration hearing in the latest chapter of their ongoing dispute over the massive Stabroek Block oilfield off the coast of Guyana.

Chevron said Wednesday in a filing with the Securities and Exchange Commission it expects a decision within three months of the hearing. The Houston-based company added it had expected and requested to hold the hearing earlier, but the common schedules of the parties made it impossible.

The companies have been locked in a dispute since February, when Exxon threatened to block Chevron’s acquisition of a 30% stake in the Stabroek Block, which is said to contain at least 11 billion barrels of oil. Ongoing arbitration hinges on the applicability of a “right of first refusal” contained in an operating agreement between subsidiaries of Exxon, Hess and China National Offshore Oil Corporation.

An abrogation of the deal could throw into question Chevron’s $53 billion acquisition of competitor Hess, which closed in October. Chevron said in the filing that its views and those of Hess remain unchanged, while claiming that Exxon and CNOOC “continue to ignore the plain language of the operating agreement.”  Exxon operates all production in Guyana, controlling a 45% stake while Hess and CNOOC serve as minority partners. Exxon and CNOOC Ltd filed arbitration claims claiming a pre-emption right to any sale of Hess’ lucrative stake in a Guyana oil-producing joint venture. The challenge threatens to block Chevron’s biggest deal since its 2001 acquisition of Texaco for $36 billion. Exxon and CNOOC have argued Chevron’s bid for Hess triggered a right of first refusal clause in their Guyana joint operating agreement. Chevron and Hess dispute that claim. The all-stock sale, announced last October, has been stalled by a second request for information by antitrust regulator, the U.S. Federal Trade Commission. Its review should be completed this quarter, a spokesman for Hess said.

Meanwhile, shares in the U.S. oil producer Hess suffered their largest daily percentage drop in 20 months on Thursday on fallout from the lengthy new delay to its proposed sale to Chevron. Reuters reported. Hess’ stock fell $11.25, or 7.35%, the largest daily percentage drop since November 2022. Chevron shares were also off 4%, or $6.57, at $153.93 in midday New York trading. Kaieteur News reported on Thursday that Hess Corp (HES.N), beat estimates for second-quarter profit on Wednesday, helped by sharply higher oil production in Guyana and stronger prices. A Reuters report stated that Hess’s production rose 27.6% to 494,000 barrels of oil and gas per day (boepd), on nearly 75% year-over-year increase in Guyana to 192,000 bpd. Its Bakken shale output also rose, the company said. It, however, expects a fall in current-quarter production due to planned downtime in Guyana and Southeast Asia. Third-quarter net production is expected to be in the range of 460,000 boepd to 470,000 boepd.

Hess said it expects its Guyana output to fall 10% as a natural gas pipeline is connected this quarter, and expects its North Dakota output to drop 4.5% on planned maintenance. The company’s average realized crude oil selling price also rose nearly 13% to $80.29 per barrel in the second quarter. A three-person arbitration panel is expected to decide on the dispute with Exxon. Exxon believes the process could extend to 2025 while both Chevron and Hess expect a resolution by the end of the year. Hess’ quarterly profit of $2.62 per share beat analysts’ average estimate of $2.48 per share, according to LSEG data.

Back in April Hess Corporation had announced that its profits leapt by $626M in the first quarter of 2024 thanks to higher production volumes in the Bakken shale in the US and the Stabroek block offshore Guyana. Back then Hess’ net income, the company said, was US$972M in the three months ended 31 March, compared to $346 million in the first quarter of 2023, according to the company’s latest earnings report. This would mean that Hess’s profits have almost tripled over the previous reporting period. According to Hess, its overall net production of oil and gas was 476,000 barrels of oil equivalent per day, up 27 percent from 374,000 barrels of oil per day (bpd) in 2023. The Bakken production surged by 27,000 (bpd), according to Hess, “while Guyana offered up an additional 78,000 (bpd) this quarter.” The first quarter results “substantially outperformed” expectations, according to a report from analyst firm TD Cowen back then. Overall production beat projections by 9 percent, while Hess’ Guyana output beat consensus by 28 percent, Cowen had noted.

 

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• Chevron, CNOOC, Exxon, Hess and China National, Offshore Oil, Stabroek Block

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