Chevron’s Bid for Hess’s Guyana Oil Stake Challenged by Exxon

Energy giant files arbitration to exercise its right of first refusal over lucrative offshore block

by Victor Adetimilehin

Exxon claims right to match offer

Exxon Mobil Corp has thrown a wrench into Chevron Corp’s plan to buy Hess Corp stake in the Stabroek offshore oil block in Guyana, one of the world’s largest and most promising oil discoveries.

The energy giant said on Wednesday that it filed a contract arbitration to preserve its right to acquire Hess’s 30% stake in the block, which could hold up to 9 billion barrels of recoverable oil and gas.

Exxon, which operates the block with a 45% interest, said it has the right to match any reasonable offer for Hess’s share, according to the terms of the joint operating agreement among the partners.

“We, as participants (in the block), have the rights to match a reasonable allocation of the value of the Hess transaction,” Exxon Senior Vice President Neil Chapman said at a Morgan Stanley event.

“Disputes take place all the time, and they get resolved. The only real difference is this is in the public domain.”

Chevron seeks to create second-largest oil company

Chevron, which agreed to buy Hess for $53 billion in November, declined to comment. Hess did not respond to a request for comment.

The deal, which would create the world’s second-largest oil company by market value, hinges on the approval of Hess’s shareholders and regulators, including the Guyanese government.

Guyana, a small South American nation that began producing oil in 2019, has become a hotspot for oil exploration and investment, thanks to the prolific Stabroek block and its low production costs.

The block, which spans 6.6 million acres, has yielded 18 discoveries so far, with the potential to produce more than 750,000 barrels of oil per day by 2025.

Chevron said it expects to generate $2 billion in annual synergies from the acquisition of Hess, which also has assets in the Bakken shale, the Gulf of Mexico, and other regions.

Exxon remains committed to Guyana

However, Exxon’s move could complicate or delay the deal, or force Chevron to pay more for Hess’s stake.

Exxon, which has been under pressure from investors and activists to improve its financial and environmental performance, said it remains committed to developing the Stabroek block and delivering value to its shareholders and Guyana.

“We have a very strong relationship with the government of Guyana, we have a very strong relationship with our co-venturers, and we have a very strong relationship with the people of Guyana,” Chapman said.

“We’re going to continue to invest and we’re going to continue to grow production and we’re going to continue to bring value to all of those stakeholders.”

Source: Reuters

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