Chevron to resolve ExxonMobil arbitration over Guyana discovery soon following $53 billion Hess acquisition, CEO predicts
(Bloomberg) – Chevron Corp. expects a resolution to a dispute with Exxon Mobil Corp. over a Guyana oil contract in coming months that would allow for the completion of the $53 billion acquisition of Hess Corp. this year.
Exxon began arbitration proceedings in March, arguing it has a right of first refusal over Hess’s 30% stake in the Stabroek Block operated and 45% owned by Exxon. Hess has asked for a hearing in the third quarter and a decision in the fourth quarter.
“That’s the timing we’re working toward in a process that’s still unfolding,” Chevron Chief Executive Officer Mike Wirth said in a Bloomberg Television interview on Monday. Five to six months is “a sufficient time frame within which to clarify the specific contract provisions here.”
Exxon and Chevron have both appointed one arbitrator to what will be a three-person panel that will decide the case. Chevron argues Exxon’s right of first refusal does not apply because its deal is a corporate merger with Hess, rather than an asset sale.
“We’re confident we have the right interpretation of this contract,” Wirth said.
The dispute already has delayed Chevron’s acquisition of Hess, threatening to leave the oil giant in strategic limbo for months or longer. The transaction still needs approval from the U.S. Federal Trade Commission through a separate process. Exxon’s discovery of an 11 Bbbl trove of oil offshore Guyana is a key driver of the stock’s outperformance relative to rivals over the past three years. The Hess deal would help Chevron close that gap.
Wirth indicated there are currently no parallel negotiations ongoing with Exxon. The arbitration proceeding is governed by the International Chamber of Commerce.
“Before the arbitration process was initiated, we had been in conversation, and Hess had been in conversation with the other members of this joint-operating agreement in an effort to understand their concerns,” Wirth said. “The arbitration really ended those discussions at the time, and that’s the path that we’re on today.”
