An arbitration panel has cleared the way for Chevron to close its $53 billion purchase of Hess, dismissing Exxon Mobil’s claim that it had a contractual right to bid for Hess’s crown-jewel assets in Guyana.
The ruling handed down Friday from the International Chamber of Commerce in Paris resolves an often tense and long-running dispute between the two largest descendants of John D. Rockefeller’s Standard Oil monopoly over one of the world’s most coveted oil projects. Chevron plans to move swiftly to close the deal, which it had originally struck in October 2023.
Exxon threw a wrench in Chevron’s plans last year when it asserted a right to pre-empt its rival’s bid for Hess’s 30% stake in Guyana’s prolific Stabroek offshore block. Chevron had argued a right-of-first-refusal on the Guyana project wouldn’t apply to the corporate takeover of Hess.
Exxon’s move to block the deal stunned the oil industry, which hadn’t seen titanic oil companies battle to these extremes since a court fight with Pennzoil forced Texaco into bankruptcy in the 1980s.
Exxon said that it disagreed with the ICC panel’s interpretation but respects the arbitration and dispute resolution process.
Hess shares surged 8% in premarket trading, while Chevron added 4%. Exxon was little changed.
With a 45% stake in the Guyana project, Exxon operates vessels that are currently pumping about 650,000 barrels of oil a day. China’s Cnooc, which sided with Exxon, has a 25% stake. The oil companies aim to produce 1.2 million barrels a day by 2027, turning the tiny South American country of 800,000 people into one of the world’s largest oil producers by capita.
The dispute hinged on the interpretation of several lines in a joint operating agreement signed more than a decade ago that governs the consortium. Hess had entered the partnership in 2014 when it acquired its stake from Shell. Some joint operating agreements allow existing partners to participate in ownership changes and pre-empt offers for ownership stakes with an offer of their own.
Exxon, Cnooc and Hess made their cases in a private arbitration hearing in London in late May.
The arbitration was considered a must-win for Chevron. The Houston-based oil company is reshaping itself after a tough year. It is restructuring parts of its business and parting ways with some 8,000 workers by the end of next year, in an effort to trim costs. Chevron’s stock-market performance has lagged behind that of Exxon over the past few years.
Investors and analysts had said Chevron’s oil-and-gas portfolio needed a boost for it to have sufficient production growth after 2030. If the Hess deal had broken down, it would have had to seek another large acquisition target, they said.
For Exxon, the loss at arbitration does little to dent the company’s turnaround coming out of the pandemic. In 2022, it booked record profits, and in 2023, it distributed a record amount to shareholders via dividends and share repurchases. Last year, its profits were down, but Exxon continued to shower investors in cash.
Exxon previously said it expected to win the arbitration—but in the event it didn’t, the company expected to continue business as usual in Guyana.
https://www.msn.com/en-us/money/markets/chevron-moves-forward-with-megadeal-for-hess-after-winning-exxon-arbitration