Chevron Closes Megadeal for Hess After Winning Exxon Arbitration

quote:

---

An arbitration panel cleared the way for Chevron to complete 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 originally struck the deal for Hess 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.

Just hours after Friday’s decision was announced, Chevron said it had closed its deal for Hess, and that it plans to nominate John Hess, the smaller company’s longtime chief executive, to its board. The Federal Trade Commission had set aside orders Thursday that had previously barred Hess from serving on Chevron’s board.

“It has been a long process, and it didn’t need to be,” Chevron CEO Mike Wirth said in an interview. “It’s unfortunate that Hess’s employees and shareholders were put through such an extended timeline. It should have been resolved quicker. The outcome was never in doubt.”

Exxon said that it disagreed with the ICC panel’s interpretation but respects the arbitration process. The company added that it had a duty to its investors to consider its pre-emption rights.

---

quote:

---

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 in the dispute, has a 25% stake. The oil companies aim to produce 1.2 million barrels daily 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.

---

quote:

---

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.

---

LINK

This is HUGE for Chevron, and possibly for any BD/Land/Legal negotiating folks who were part of advising to pull the 53 Billion trigger on this acquisition and hoping to hang on to their jobs. The Guyana position was THE reason to buy Hess.