Arbitration Panel to Decide Fate of Exxon's Claim in Chevron-Hess Deal

Four people familiar with the matter have told Reuters that an arbitration panel that will decide a case by Exxon Mobil (NYSE:CVX) seeking to block a merger between Chevron Corp. (NYSE:CVX) and Hess Corp. (NYSE:HES) will try to determine the real value of Hess' Guyana stake. 

In May, Hess shareholders approved its proposed $53B merger with Chevron despite Exxon's attempts to stop the deal. 

Exxon claims that Hess should have first given it the opportunity to purchase its stake in the prized Guyana asset and that Chevron structured the deal in a way to bypass Exxon's right of first refusal if it's triggered by a change of control in Guyana. Currently, Exxon owns a 45% stake in oil-rich Guyana, while Hess and China's CNOOC own a 30% and 25% stake, respectively.

Getting the panel to consider the appraised value of Hess' stake is pivotal in Exxon's claim that the deal is, in reality, an asset acquisition disguised as a merger. According to Exxon, the Guyana asset is so valuable that the merger would trigger a change of control and give Exxon and CNOOC a right of first refusal to the asset sale. 

According to Christopher B. Strong, vice president of the trade group Association of International Energy Negotiators (AIEN), valuation can be a critical and lengthy step in change-of-control disputes. 

Earlier in the year, Exxon CEO Darren Woods told Reuters that he would consider a counterbid for all or part of Hess Guyana's stake, but only after an arbitration panel accepts its claim to first right.

Last month, Hess posted an impressive second-quarter earnings report, with its stake in prolific Guyana helping it exceed estimates. The company reported Q2 2024 non-GAAP EPS of $2.62, beating the Wall Street consensus by $0.07, while revenue of $3.26B was good for a robust 40.5% Y/Y growth, although it missed the consensus by $30M. 

Hess's production increased 27.6% to 494,000 barrels of oil and gas per day (boepd), thanks in large part to a 75% year-over-year increase in Guyana to 192,000 bpd, up from 110,000 boepd in the prior year quarter.

By Alex Kimani for Oilprice.com

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