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Chevron’s $53 Billion Deal for Hess in Jeopardy on Possible Exxon Challenge

Posted on 2/26/24 at 6:35 pm
Posted by ragincajun03
Member since Nov 2007
22790 posts
Posted on 2/26/24 at 6:35 pm
quote:

Chevron warned investors Monday that Exxon Mobil and China’s Cnooc are asserting they have a right to pre-empt the company’s bid for a stake in a prolific oil project off Guyana, an emerging dispute that could derail Chevron’s megadeal for Hess.

Chevron said in a regulatory filing that Exxon and Cnooc say they have the right to counter Chevron’s offer for Hess’s stake in the Guyana project, which Exxon operates and is one of the largest oil finds in years. Chevron warned investors it may not complete its purchase of Hess “within the time frame the company anticipates or at all.”

Much of the value in Chevron’s $53 billion all-stock acquisition of Hess proposed last year was tied to the smaller New York oil company’s 30% stake in an Exxon-led drilling consortium in Guyanese waters. The partnership has expanded oil production far faster than most offshore oil projects and expects to pump over 1 million barrels a day in coming years.

The development is a potential blow to Chevron’s largest acquisition in years, though it isn’t clear if Exxon and Cnooc will make a counteroffer. At this point, they are only asserting their right to do so.


quote:

The dispute boils down to the terms of a joint operating agreement, or JOA, signed more than a decade ago, which governs the consortium. Hess had entered the JOA in 2014 when it purchased its stake from Shell. Some JOAs allow existing partners, like Exxon, to participate in ownership changes, and pre-empt an offer for an ownership stake with an offer of their own.


quote:

Exxon has a 45% share in the Guyana oil project and Cnooc owns the remaining 25%.

The clash with Exxon is a setback for Chevron Chief Executive Mike Wirth, who late last year disclosed delays and cost overruns for a massive oil project in Kazakhstan, as well as shareholder returns that have recently underperformed rival Exxon.


quote:

Exxon and Chevron have sold off billions of assets in Asia and Africa in recent years, underscoring the growing importance of the U.S. shale plays and South America. Chevron last year began pumping oil in Venezuela again as the Biden administration eased sanctions. It helped to restore production there to faster growth than the market anticipated. It also is investing in Argentina’s shale and is exploring for oil and gas off Suriname, near Guyana.


LINK
Posted by O
Mandeville
Member since Oct 2011
6551 posts
Posted on 2/26/24 at 6:37 pm to
What does this mean for my truck nuts?
Posted by boosiebadazz
Member since Feb 2008
81296 posts
Posted on 2/26/24 at 6:40 pm to
Some M&A senior associate in NYC has the tightest butthole right now for missing this in due diligence.
Posted by ragincajun03
Member since Nov 2007
22790 posts
Posted on 2/26/24 at 6:45 pm to
quote:

Some M&A senior associate in NYC has the tightest butthole right now for missing this in due diligence.


I’m sure said senior associate will pass the blame to some BD guy who isn’t even a manager or team lead.

Maybe a team lead might take the hit. That’s about how high up any repercussions will happen.
This post was edited on 2/26/24 at 6:47 pm
Posted by Jim Rockford
Member since May 2011
100767 posts
Posted on 2/26/24 at 6:48 pm to
Crawfish prices soar on the news.
Posted by StreamsOfWhiskey
The Woodlands, TX
Member since Jun 2013
668 posts
Posted on 2/26/24 at 6:48 pm to
Stunning that they could miss this.
Posted by GREENHEAD22
Member since Nov 2009
19846 posts
Posted on 2/26/24 at 6:55 pm to
Hopefully ExxonMobil gets the majority of Hess share. Screw the chinese.
Posted by billjamin
Houston
Member since Jun 2019
13958 posts
Posted on 2/26/24 at 7:00 pm to
quote:

Some M&A senior associate in NYC has the tightest butthole right now for missing this in due diligence.

This is the truth. Someone is frantically looking through correspondence to find anything that he can remotely spin into “see I told them”.
Posted by PGAOLDBawNeVaBroke
Member since Dec 2023
1051 posts
Posted on 2/26/24 at 7:02 pm to
This should’ve been extremely obvious and expected by even the dumbest Landman.

Who was on this deal? Hess always uses Goldman so they were definitely involved lol. Morons.
Posted by lostinbr
Baton Rouge, LA
Member since Oct 2017
10839 posts
Posted on 2/26/24 at 7:02 pm to
quote:

Some M&A senior associate in NYC has the tightest butthole right now for missing this in due diligence.

It’s entirely possible that they simply misread the room and didn’t think Exxon would try to execute their right of first refusal on the deal.

It’s also entirely possible that Exxon is going out on a limb with their claim that the right of first refusal even applies to a wholesale acquisition of Hess (rather than Hess trying to sell their stake in the partnership).

ETA: I would think either of these scenarios are more likely than the provision being completely missed during the acquisition. The Guyana deal is supposedly one of the main reasons Chevron wanted Hess in the first place.
This post was edited on 2/26/24 at 7:05 pm
Posted by waiting4saturday
Covington, LA
Member since Sep 2005
9978 posts
Posted on 2/26/24 at 7:04 pm to
quote:

It’s also entirely possible that Exxon is going out on a limb with their claim that the right of first refusal even applies to a wholesale acquisition of Hess (rather than Hess trying to sell their stake in the partnership).


This is probably the case. Chevron is not buying Hess's stake in Guyana, they are buying Hess as a whole. I would imagine Exxon is just trying to flex their muscles but in the end the deal will go through.
This post was edited on 2/26/24 at 7:05 pm
Posted by Putty
Member since Oct 2003
25698 posts
Posted on 2/26/24 at 7:15 pm to
quote:

Some M&A senior associate in NYC has the tightest butthole right now for missing this in due diligence


Pretty slim chance it was missed. Probably knew the change of control pref right issue was out there and decided deal was worth an offer anyway. You don’t pass on a mega deal bc there is a possibility someone might exercise a pref right. If anything, you go in with a stronger than usual bid to disincentivize the holder of the pref right.
Posted by Putty
Member since Oct 2003
25698 posts
Posted on 2/26/24 at 7:23 pm to
quote:

buying Hess as a whole. I would imagine Exxon is just trying to flex their muscles but in the end the deal will go through.


Need to see the OA to know. Definitely not unheard of for a “change of control” (which anppears obvious under the described transaction) to constitute a “transfer” which triggers pref rights. I’ve seen a number of offshore OAs that have that language. And many that don’t.
Posted by VetteGuy
Member since Feb 2008
30722 posts
Posted on 2/26/24 at 7:25 pm to
You know your stuff.



Still, trying to take Elaine to Arby's was a misstep...
Posted by Putty
Member since Oct 2003
25698 posts
Posted on 2/26/24 at 7:28 pm to
lol. Good one.

High five

This post was edited on 2/26/24 at 7:31 pm
Posted by sneakytiger
Member since Oct 2007
2486 posts
Posted on 2/26/24 at 7:49 pm to
quote:

Some M&A senior associate in NYC has the tightest butthole right now for missing this in due diligence.




You think a banker is going to tell a client not to do a deal because of a rofr??
Posted by PGAOLDBawNeVaBroke
Member since Dec 2023
1051 posts
Posted on 2/26/24 at 8:06 pm to
It definitely is why they wanted the deal which makes this all the more stupid. They could’ve just went after that working interest instead. CVX doesn’t want HES bakken exposure that’s for sure
Posted by PGAOLDBawNeVaBroke
Member since Dec 2023
1051 posts
Posted on 2/26/24 at 8:11 pm to
But that constitutes a change of control and XOM absolutely will have a rofr on that. Doesn’t matter if it’s a whole acquisition or not.
Posted by PGAOLDBawNeVaBroke
Member since Dec 2023
1051 posts
Posted on 2/26/24 at 8:12 pm to
Yea well the deal hasn’t closed so that banker isn’t getting paid and dead deal fees out the arse from the BigLaw firms who will collect no matter what
Posted by TDFreak
Dodge Charger Aficionado
Member since Dec 2009
7714 posts
Posted on 2/26/24 at 8:29 pm to
quote:

would imagine Exxon is just trying to flex their muscles
Exxon is asshoe!
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