Chevron completes Hess acquisition after defeating Exxon in dispute over Guyana oil assets

Chevron can quickly proceed with its $53 billion acquisition of Hess, after winning a landmark legal battle against larger rival ExxonMobil, gaining access to the largest oil discovery in decades.

Chevron CEO Mike Wirth’s strategy to turn around his company’s lagging performance hinges on the acquisition, one of the largest energy deals in the past decade. The prize is a stake in the prolific Stabroek Block off the coast of Guyana that holds more than 11 billion barrels of oil and is one of the fastest-growing oil provinces in the world.

Shares in Chevron rose three per cent in premarket trading, while those of Hess jumped seven per cent. Exxon shares were marginally lower.

Exxon and China’s CNOOC, Hess’ partners in Guyana, had filed arbitration disputes that claimed they held a pre-emptive right to purchase Hess’ stake, which delayed Chevron’s closure of the Hess acquisition for over a year.

“We disagree with the International Chamber of Commerce (ICC) panel’s interpretation but respect the arbitration and dispute resolution process,” Exxon said in a statement.

“Given the significant value we’ve created in the development of the Guyana resource, we believed we had a clear duty to our investors to consider our preemption rights to protect the value we created through our innovation and hard work at a time when no one knew just how successful this venture would become,” the company added.

There is no appeals process at the International Chamber of Commerce, the court that oversaw the arbitration case.

Chevron, Hess and CNOOC did not immediately respond to Reuters’ requests for comment.

Even as it awaited the arbitration verdict, Chevron was making preparations so it could close the deal with Hess within 48 hours of resolving the arbitration and complete other operational tasks within 45 days, Reuters previously reported.

Information technology workers from Chevron and Hess have met regularly to plan the integration, and Hess employees were informed that they could request a severance package following the deal’s close.

The claims from Exxon and CNOOC had kicked off a lengthy legal battle that captured the attention of the global oil industry, shareholders, and attorneys who craft joint operating agreements that govern oil partnerships around the world.

The dispute centred on the interpretation of just several words in the confidential joint operating agreement between Exxon, Hess and CNOOC, experts have told Reuters.
(Reuters)