Chevron’s $5 Billion Mega Acquisition of Hess Approved After Legal Victory Over ExxonMobil
In a significant development for the global oil industry, Chevron Corporation has secured a decisive victory in an international arbitration dispute against Exxon Mobil Corporation, paving the way for its $53 billion acquisition of Hess Corporation. The legal victory gives Chevron access to Hess’s substantial stake in the prolific Stabroek Block off the coast of Guyana, a highly lucrative oil discovery estimated to hold more than 11 billion barrels of crude oil.
The acquisition is seen as a validation of Chevron’s strategic vision under CEO Mike Wirth and a significant step forward in Chevron’s efforts to revitalize its performance. In premarket trading, shares of Chevron increased by 3.6%, while Hess saw a more substantial gain of 7.4%. Exxon Mobil’s shares experienced minimal decline.
Exxon Mobil, in response to the arbitration outcome, stated, “We disagree with the International Chamber of Commerce (ICC) panel’s interpretation but respect the arbitration and dispute resolution process.” The company also expressed its belief in having a clear duty to protect the value it had created through innovation and hard work in developing the Guyana resource.
The ICC arbitration process does not have an appeals mechanism, with Exxon Mobil expressing respect for the overall arbitration and dispute resolution process. CNBC first reported the arbitration outcome, and an Exxon Mobil spokesperson later confirmed the news to Reuters.
The legal battle stemmed from disputes over pre-emptive rights regarding the sale of Hess’s 30% interest in the Stabroek Block joint venture. Both Chevron and Hess claimed that the pre-emptive right did not apply to the sale of the entire Hess company, while Exxon Mobil and China National Offshore Oil Corporation (CNOOC), who together hold a 70% interest in the joint venture, argued they had a contractual right-of-first-refusal.
The dispute attracted widespread attention within the global oil industry, among shareholders, and legal experts specializing in crafting joint operating agreements for oil partnerships worldwide. Experts suggest that the disagreement likely revolved around the interpretation of a few key words in the confidential joint operating agreement between the three parties.
During a conference in May, an Exxon executive expressed a commitment to collaborating with Chevron in Guyana should arbitrators rule against Exxon’s claim. The outcome of this legal battle underscores the value of the Stabroek Block, which has driven profits for the Exxon-led consortium, transformed Guyana into one of the world’s fastest-growing economies, and continues to offer potential for further oil discoveries.
In 2023, Hess earned $1.9 billion from its Guyana operations; however, in the following year, earnings increased significantly to $3.1 billion. Chevron’s adjusted earnings in 2022 totaled $18.3 billion, a decrease from $24.7 billion in 2023.
Even as it awaited the arbitration verdict, Chevron had been making preparations to finalize the acquisition and complete necessary operational tasks within a short timeframe. As reported by Reuters, Chevron was ready to close the deal within 48 hours of resolving the arbitration and complete other operational tasks within 45 days.
