Chevron Clears Final Hurdle To Hess Megadeal After Winning Exxon Arbitration

Shares of Chevron and Hess climbed in premarket trading in New York after the International Chamber of Commerce (ICC) in Paris rejected Exxon Mobil’s attempt to block Chevron’s $53 billion acquisition of Hess. 

An arbitration panel from the ICC dismissed Exxon’s claim that it had the right to preempt the Chevron-Hess deal due to its existing stake in Guyana’s Stabroek oil block, according to The Wall Street Journal. The ruling resolves the dispute between the two oil giants that control one of the world’s top offshore projects. 

Exxon threw a wrench into Chevron’s takeover of Hess (first announced in October 2023), claiming a right to preempt the deal over Hess’s 30% stake in the Stabroek block. Chevron argued that the right of first refusal didn’t apply to a corporate acquisition.

Guyana’s Stabroek oil block is one of the world’s top offshore oil discoveries in recent decades. Exxon operates the block with a 45% stake, alongside Hess with a 30% stake, and China’s Cnooc with a 25% stake. The block is producing 650,000 barrels of oil per day, with estimates suggesting that oil companies can pump upwards of 1.2 million barrels per day by 2027. 

WSJ noted, “The dispute hinged on the interpretation of several lines in a joint operating agreement signed more than a decade ago that governs the consortium. Hess had entered the partnership in 2014 when it acquired its stake from Shell. Some joint operating agreements allow existing partners to participate in ownership changes and preempt offers for ownership stakes with an offer of their own.”

With the ICC siding in its favor, Chevron can now move forward with the Hess acquisition. This was a must-win arbitration as the oil/gas giant undertakes a major restructuring to cut costs. 

Additional commentary from WSJ:

Investors and analysts had said Chevron’s oil-and-gas portfolio needed a boost for it to have sufficient production growth after 2030. If the Hess deal had broken down, it would have had to seek another large acquisition target, they said.

For Exxon, the loss at arbitration does little to dent the company’s turnaround coming out of the pandemic.

In the markets, Chevron shares rose 3% in premarket trading, while Hess jumped 7%. Shares of both companies have been holding in a flag pattern since peaking in 2022-23. 

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