ExxonMobil Accepts Chevron as Stabroek Partner after Arbitration Loss

Exxon Mobil Corp. has expressed disagreement with an arbitration ruling that paved the way for Chevron Corp. to complete its delayed acquisition of Hess Corp. and thereby take over Hess’ stake in Guyana’s Stabroek block.

However, ExxonMobil said it accepts the resolution and “welcomes” Chevron as a Stabroek partner.

While both ExxonMobil and Chevron cleared extended U.S. anti-trust reviews of their acquisition of Pioneer Natural Resources Co. and Hess respectively last year, Chevron’s purchase of Hess was delayed to 2025 due to arbitration by ExxonMobil and China National Offshore Oil Corp. (CNOOC). The arbitration was meant to protect their preemption rights in Stabroek. Hess owns a 30 percent stake in the offshore block, which has placed Guyana among the fastest-growing non-OPEC producers. ExxonMobil operates the block with a 45 percent interest, while CNOOC owns 25 percent.

On Friday Chevron announced its merger with Hess had been completed after a favorable ruling by the International Chamber of Commerce (ICC) tribunal in Paris.

“We disagree with the ICC panel’s interpretation but respect the arbitration and dispute resolution process”, ExxonMobil said in an online statement.

However, the statement said, “As we’ve said before, ExxonMobil and CNOOC are aligned that we had a duty to ensure contract terms are always adhered to and not set a bad precedent for ourselves and industry”.

“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”, ExxonMobil added.

“We welcome Chevron to the venture and look forward to continued industry-leading performance and value creation in Guyana for all parties involved”.

Announcing the consummation of its merger with Hess, Chevron said, “The acquisition adds world-class assets, including Guyana and U.S. Bakken, to Chevron’s diversified global portfolio where it is a leader in the Permian Basin, Gulf of America, DJ Basin, Kazakhstan, Eastern Mediterranean and Australia”.

“Chevron now owns a 30 percent position in the Guyana Stabroek Block, which has more than 11 billion barrels of oil equivalent discovered recoverable resource; 463 thousand net acres of high-quality inventory in the Bakken; complementary assets in the Gulf of America with 31 thousand barrels of oil equivalent per day; and natural gas assets in Southeast Asia with 57 thousand barrels of oil equivalent per day”, Chevron added.

Hess shareholders receive 1.0250 Chevron shares for each Hess share. “As a result, Chevron intends to issue approximately 301 million shares of common stock out of treasury to Hess stockholders in connection with the transaction”, Chevron said.

“The 15.38 million shares of Hess common stock (which were acquired in open market transactions) beneficially owned by Chevron immediately prior to the closing were cancelled for no consideration”.

Hess officials departed the company, with Chevron’s Bruce L. Niemeyer appointed as president. Niemeyer has been Chevron president for exploration and production in the Americas since October 2022.

Harsh Goyal, Andrew D. Stead and Nicola E. Woods have also been named directors of Hess under Chevron, Hess said in a regulatory filing.

Chevron said John B. Hess, Hess chief executive before the merger, could join Chevron’s board subject to board approval.

Hess had been barred from holding a board, advisory or representative position at Chevron as part of conditions set by the Federal Trade Commission (FTC) in issuing a consent order for the merger days before Joe Biden stepped down as president in January.

On Thursday the FTC canceled its consent order for the combination, as well as the consent order for the ExxonMobil-Pioneer merger, saying the complaints by the FTC under the Biden administration about potential harm to competition had been technically deficient.

As a result of the reversals, Hess and Pioneer founder and ex-chief executive Scott Sheffield are no longer barred from holding board or advisory positions at the enlarged Chevron and ExxonMobil respectively.

Investigations by the previous FTC found John Hess and Sheffield had held talks with OPEC+ officials about artificially controlling production, leading to the FTC restricting their involvement with Chevron and ExxonMobil post-merger. John Hess and Sheffield have denied the accusations.

“John is a respected industry leader, and our Board would benefit from his experience, relationships and expertise”, Chevron chair and chief executive Mike Wirth said Friday.

Hess shares ceased trading on the New York Stock Exchange on Friday.

To contact the author, email jov.onsat@rigzone.com