Chevron has warned that its planned $53bn acquisition of Hess could be thwarted by rivals ExxonMobil and China National Offshore Oil Corporation, which are asserting their right to pre-empt its purchase of a stake in a Guyana oil project that is central to the deal.
Chevron, the second-biggest US oil company, has been “engaged in discussions” with Exxon and Cnooc — joint owners of the Stabroek Block project — “regarding a right of first refusal provision in the joint operating agreement” for the development, it said in a regulatory filing on Monday.
If the talks did not “result in an acceptable resolution”, or if any subsequent arbitration did not confirm its belief that the right of first refusal did not apply in this case, Chevron said the takeover of Hess would not close.
The friction underlines the value attached to the Guyana project — the biggest oil find globally in the past decade and the crown jewel of the assets to come with Hess, the largest deal in Chevron’s history.
There was little international interest in Guyana’s hydrocarbon potential until an Exxon-led consortium made a significant discovery off its coast in 2015. In the years since, the group has made more than 30 such discoveries in the area.
In a statement on Monday, Exxon — the biggest US supermajor — said it was “engaged in conversations with Hess and Chevron and those conversations will continue”.
“We owe it to our investors and partners to consider our pre-emption rights in place under our joint operating agreement to ensure we preserve our right to realise the significant value we’ve created and are entitled to in the Guyana asset,” it added.
Shares in Hess fell 4 per cent in after-hours trading, while Chevron’s dropped 1 per cent. Exxon’s shares were little changed.
Jason Gabelman, an analyst at TD Cowen, said the “most likely outcome is one in which the . . . deal is ultimately consummated, perhaps with a bit of a delay”.
He added: “A low-probability outcome is one in which an arbitrator rules a [right of first refusal] is applicable, in which case the deal would fail and [Hess] would continue to exist as an independent company with its current interest in the Stabroek Block.”
Guyana’s oil riches, estimated at 11bn barrels of gross recoverable resource for the Stabroek Block, have thrust the South American nation into the limelight, with neighbouring Venezuela bulking up its military presence on the border as it argues it has rights to the country’s oil-rich eastern Essequibo region.
Exxon owns a 45 per cent stake in the Stabroek project, of which it is also the operator; Cnooc owns 25 per cent. The remaining 30 per cent is owned by Hess and due to be passed to Chevron as part of the deal.
In a statement on Monday a Chevron spokesperson described the talks with Exxon and Cnooc as “constructive” and said that neither Chevron nor Hess believed the right of first refusal provision applied to the deal.
He added that “there is no possible scenario in which Exxon or Cnooc could acquire Hess’ interest in Guyana as a result of the Chevron-Hess transaction”.
He said Chevron remained “fully committed to the transaction” and did not believe the provision or discussions “will prevent its successful completion”.
Hess and Cnooc did not immediately respond to requests for comment.
