Oil Titans Clash: Exxon Power Move to Block Chevron’s $60 Billion Hess Takeover

Suspecting a contractual breach, two of the oil sector’s biggest names are fighting to obtain a lucrative, oil-rich stake that could award some major power to the winner. 

Battle of the Giants 

Two of the oil industry’s most powerful titans, ExxonMobil and Chevron, are currently headbutting over Chevron’s forthcoming acquisition of Hess.

Money and Power… What Else? 

The main reason? Hess’s profitable stake in the Stabroek block, a 6.6-million-acre offshore oil reservoir off the Atlantic coast near Guyana in South America.

Me First! 

Both Exxon and China National Offshore Oil Corporation (CNOOC) are contesting the deal, asserting that, according to contract, they should have first right to the Hess stake.

Read the Fine Print 

As Exxon claims, that stake has such high value that the merger with Chevron oversteps a contractual clause, which is why they should be first in line. 

See You in Court 

After negotiation efforts failed, the companies decided to seek arbitration for a final ruling, for which a hearing was set in May next year. 

All or Nothing 

As indicated in the report, Chevron CEO Michael Wirth is firmly against reaching a compromise with Exxon and CNOOC.

Exxon Wants In  

On the other hand, Exxon’s CEO, Darren Woods, is contemplating placing a counterbid for either the entirety or a share of Hess Guyana’s stake, should the outcome of the arbitration lean towards their side. 

So, Who Owns Whom? 

In October 2023, Chevron reached an agreement to acquire Hess in an all-stock transaction for $53 billion – or, if you include the debt, $60 billion. 

This represented one of the two biggest deals in a significant wave of consolidation during the past few decades within the oil sector. 

Tit for Tat? 

The Chevron deal is seen as a strategic response to Exxon’s high-prized acquisition of Pioneer Natural Resources, as Exxon is eyeing Hess’s most valuable asset, located in the Stabroek block, for itself. 

A Valuable Investment 

As Chevron claims, repurchasing Hess and acquiring Guyana’s Stabroek block, which the company refers to as “an extraordinary asset with industry-leading cash margins and low carbon intensity that is expected to deliver production growth into the next decade”, would significantly upgrade its already impressive resource portfolio. 

Timing is Everything 

The Chevron deal was announced within two weeks of Exxon publicizing its giant merger agreement with Pioneer Natural Resources.

Currently King 

That deal, a $64.5 billion acquisition (including debt), resulted in Exxon emerging as the Permian Basin’s largest producer in May.   

More Power 

Exxon has been on a mission to concentrate its growth on oil production with higher margins in Guyana, where it shares ownership of the Stabroek Block with Hess and CNOOC, as well as in the Permian Basin, known as the most productive oilfield in the US.

Shared by Three 

This joint development agreement is shared by three parties: Exxon with a 45% share, Hess with 30%, and CNOOC coming in with a 25% stake. 

Promises Broken? 

And it’s in that very same agreement in which a clause was added, stipulating that any change of control should grant the other partners the first right to make an offer if any of the other parties attempt to sell their interest – the same clause that Exxon claims is being overstepped. 

Not According to Chevron 

Chevron disagrees since it’s purchasing not just Hess’s stake in Stabroek, but the entire company. 

As reported to Reuters, both Chevron and Hess assert the Guyana asset valuation should have no impact on the arbitration proceedings and argue that no change of control is implemented in the transaction. 

This Won’t Be Quick 

Speaking to the Financial Times, Kathy Mikells, Chief Financial Officer at Exxon, stated: “We’ve always thought that this matter is too important to rush through and that we were going to need to bring forward all the relevant facts to be taken into consideration — and that would take some time.” 

Patience Is a Virtue 

Chevron had high hopes that a decision would be reached in the fourth quarter of 2024. 

As stated by its chief executive, Mike Wirth, Chevron wanted a “sensible” compromise that would recognize Exxon’s claim, “but it doesn’t appear that is how this is going to end up”. 

Possible Outcomes? 

Should the arbitration rule in favor of Exxon, odds are that it will stop Chevron from purchasing Hess, potentially enhancing Exxon’s stake in a premier oil resource. 

And if Chevron wins, it will finalize its deal and place itself in a much more competitive stance against Exxon. 

Now We Wait 

As per the arbitration timeline, the Hess deal can’t be completed until the end of 2025 – if at all.

Meanwhile, Chevron has stated that it will withdraw from the agreement, the largest in the company’s history, if Exxon wins. 

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