Hess eyeing possible delay of Chevron merger to 2025

– amid ExxonMobil int’l arbitration challenge

While United States (US) oil firm Hess agreed to sell its stake in the Stabroek block to Chevron and there had been expectations that the deal would be concluded by mid-2024, Hess is also catering for the possible delay of the deal’s finalization to 2025… amid its partner ExxonMobil’s challenge to the merger.
In a United States Securities and Exchange Commission (SEC) filing, Hess noted that since they agreed to merge with Chevron, other conditions must be completed including stockholder and regulatory approvals. According to Hess, a special meeting will be held with stockholders to deal with the merger.
“As previously disclosed, on October 22, 2023, the company entered into the merger agreement with Chevron. The merger agreement provides that, among other things and subject to the terms and conditions of the merger agreement, the Merger Subsidiary will be merged with and into Hess, and Hess will be the surviving corporation in the merger as a direct, wholly-owned subsidiary of Chevron.”
“Completion of the merger is subject to the satisfaction of certain closing conditions, including stockholder and regulatory approvals. We will be holding a separate special meeting of stockholders to vote on the proposed merger,” they explained, adding that their 2025 annual meeting of stockholders will go ahead only if the Chevron merger has not been completed by the time this meeting is scheduled.
Back in October 2023, it was announced that Hess Corp. had agreed to merge with Chevron. This deal would allow Chevron to buy into Hess a 30 per cent stake in the oil-rich Stabroek Block, which is operated by ExxonMobil, which has the majority interest of 45 per cent while CNOOC holds the remaining 25 per cent stake.

But in March, ExxonMobil announced that it had filed a case in the International Chamber of Commerce to assert its right of first refusal over Hess’ interest offshore Guyana. While the Chevron/Hess merger could now be delayed in light of Exxon’s arbitration, both Hess Corp and Chevron have for the large part remained confident of the US$53 billion deal going through.
An article published by Bloomberg last month indicated that while the deal may be delayed, Hess Corp. is confident its arguments would prevail in the arbitration case filed by Exxon. In a previous email to employees, Hess had said “We disagree with ExxonMobil’s interpretation of the agreement and are confident that our position will prevail in arbitration… There is no possible scenario in which Exxon or CNOOC could acquire Hess’ interest in Guyana as a result of the Chevron-Hess transaction.”
According to Bloomberg, this disclosure marks the first time either Hess or Chevron have said Exxon’s push to safeguard its preemption rights in Guyana could delay their merger, initially expected to close by the second half of this year.
It’s also the first time either company has been so explicit about their disagreement over how Exxon is interpreting its joint agreement with Hess and Chinese oil giant CNOOC Ltd. to produce oil off the coast of the South American nation, according to the article.
“We’re absolutely confident that within this contract, we have pre-emption rights, and we have filed for arbitration to make sure that we can secure those pre-emption rights… The pre-emption rights are to give us the opportunity to look at the value, which we can then match should we choose to do so,” Exxon’s senior vice president Neil Chapman had said at the time, adding that arbitration of this nature typically takes “five to six months”.
Bloomberg had also said in its article that if Exxon succeeds in blocking the takeover, Hess would be required to pay Chevron a $1.7 billion break-up fee. However, both Hess and Chevron have declared their intention to see the deal through. (G-3)