Hess reviews timeline for Chevron deal closing after Exxon escalates Guyana dispute

Hess Corp. is reviewing the timeline for when its merger with Chevron will close after Exxon Mobil this week escalated a dispute over lucrative oil assets in Guyana.

Exxon filed for arbitration Wednesday to defend what the oil major views as its right to make a counter offer for Hess’ Guyana assets under a joint operating agreement.

“We disagree with ExxonMobil’s interpretation of the agreement and are confident that our position will prevail in arbitration,” Hess told employees in an email Wednesday.

“In light of today’s development, we are reviewing the expected timeline for legal closing and will provide further detail in our next merger update,” Hess wrote.

Chevron entered an agreement in October to purchase Hess for $53 billion, in a play to gain a foothold in Guyana’s massive offshore oil resources. The deal was originally slated to close in the first half of 2024, but the timeline has since been delayed until the middle of the year as the Federal Trade Commission scrutinizes the deal.

Chevron has said arbitration over Hess’ Guyana assets could delay the closing timeline until October 2025, according to a filing with the Securities and Exchange Commission.

Hess is part of a consortium with Exxon and China National Offshore Oil Corporation that operates the Stabroek oil block, a massive offshore resource with an estimated 11 billion barrels of oil and gas.

Hess has a 30% stake in the Stabroek block. Exxon leads the project with a 45% stake while CNOOC maintains 25% stake.

Chevron warned investors in a filing last week that the deal with Hess would terminate if an arbitration court rules that Exxon has a right of first refusal. If that scenario played out, Hess would continue to operate as an independent company and retain its stake in the Guyana assets, according to Chevron’s filing.

Chevron has maintained that the joint operating agreement does not apply to its merger with Hess.

Exxon Senior Vice President Neil Chapman said Wednesday that the oil major is “extremely confident in our position that pre-emption rights exist in this contract.” Arbitration disputes can take up to six months to resolve, Chapman said.

Chapman indicated that Exxon could make a bid for Hess’ stake in the Stabroek block.

“We believe there is opportunity value here, there is option value here,” Chapman said during an interview at a Morgan Stanley event. “If that transaction does not proceed, there is potential value down the road for Exxon Mobil — that option value is really, really important.”

“It would be incomprehensible for us to say ‘well we’re not going to look at that value, we’re just going to let the transaction proceed,'” Chapman said. “You have a responsibility to shareholders.”

Hess said in the Wednesday email that “there is no possible scenario in which Exxon or CNOOC could acquire Hess’ interest in Guyana as a result of the Chevron-Hess transaction.”