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The oil and gas industry is in a state of flux, with major players like Chevron, Exxon Mobil, and Hess Corp. embroiled in a high stakes dispute over lucrative oil assets in Guyana. The battle for control over these assets has resulted in arbitration proceedings and could potentially delay the closing of Chevron’s $53 billion all-stock deal to acquire Hess Corp.
The conflict centers around Hess’ stake in the Stabroek oil block, a massive offshore resource estimated to contain 11 billion barrels of oil and gas. Hess, along with partners Exxon and China National Offshore Oil Corporation (CNOOC), operate the block as part of a joint venture. Hess holds a 30% stake in the project, while Exxon leads with 45% and CNOOC maintains a 25% stake.
Chevron’s acquisition of Hess was seen as a strategic move to gain access to Guyana’s offshore oil resources. However, Exxon Mobil believes it has a right to make a counter offer for Hess’ stake in the Stabroek block under a joint operating agreement. This has led to Exxon filing for arbitration to defend its position and potentially make a bid for Hess’ assets.
The dispute between Exxon and Hess has thrown a wrench into Chevron’s plans to close the deal with Hess. The original timeline for the merger, which was slated for the first half of 2024, has been delayed until the middle of the year as the Federal Trade Commission conducts a review of the deal. Chevron has warned that the arbitration proceedings could further delay the closing timeline until October 2025.
In a filing with the Securities and Exchange Commission, Chevron stated that if an arbitration court rules in favor of Exxon, the deal with Hess would terminate. This would mean Hess would continue to operate as an independent company and retain its stake in the Guyana assets. Chevron has maintained that the joint operating agreement between Hess and Exxon does not apply to its merger with Hess.
Exxon, on the other hand, is confident in its position that it has pre-emption rights under the joint operating agreement. The oil major’s Senior Vice President, Neil Chapman, has indicated that Exxon could make a bid for Hess’ stake in the Stabroek block if the arbitration dispute is resolved in its favor.
Despite the uncertainty surrounding the deal, both Hess and Chevron remain committed to seeing it through. In an email to employees, Hess CEO John Hess expressed confidence that their position would prevail in arbitration and stated that there is no scenario in which Exxon or CNOOC could acquire Hess’ interest in Guyana as a result of the Chevron-Hess transaction.
The ongoing saga between Exxon, Chevron, and Hess highlights the complexities and uncertainties of the oil and gas industry. As these companies continue to vie for control over valuable oil assets, the outcome of the arbitration proceedings will have significant implications for the future of the industry in Guyana and beyond. Only time will tell how this high stakes battle for control over oil resources plays out in the coming months.
