In a recent development that shook the energy market, Hess Corporation witnessed a nearly three percent drop in its shares on Tuesday, closely followed by a two percent decline in Chevron’s shares. The cause? A looming dispute involving ExxonMobil and China National Offshore Oil Corp. (CNOOC) over shares in Guyana’s Stabroek Block which could potentially thwart Chevron’s bid to acquire Hess.
Chevron, in a bid valued at $53 billion in an all-stock transaction in October, aimed to solidify its position in Guyana’s lucrative offshore oil assets. At the heart of the matter lies Hess Corporation’s 30% stake in the Stabroek Block consortium alongside Exxon’s 45 percent and CNOOC’s 25 percent stake, dedicated to developing Guyana’s Stabroek oil block, renowned for its estimated reserves of over 11 billion barrels of oil equivalent.
The crux of the dispute lies in Exxon and CNOOC’s claims of preemptive rights to acquire Hess’ stake in Guyana’s assets under a joint operating agreement, should Chevron’s acquisition of Hess materialize.
“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 have created and are entitled to in the Guyana asset,” Exxon said in a statement on Monday.
In a filing late Monday, Chevron cautioned investors about the potential ramifications of this dispute, indicating that it could lead to significant delays or even the collapse of the acquisition deal.
However, Chevron maintains its stance that the joint operating agreement does not impede its acquisition of Hess, and it is actively engaged in discussions with Exxon and CNOOC to find a resolution.
Analysts speculate that the resolution of the dispute might entail financial compensation, with questions looming over which party—Chevron or Hess—would bear the financial brunt.
Moreover, the prospect of arbitration looms large, with potential outcomes including Exxon emerging as the sole buyer if Hess opts to sell, albeit at a considerable price tag estimated by Japanese financial holding group, Mizuho to be as high as US$50 billion.
Exxon Guyana’s President, Alistair Routledge recently revealed that in total thus far, the Stabroek Block consortium—Exxon, CNOOC, and Hess—invested some US$29B in the block which accounts for capital and operating expenditure.
Its operations have so far provided discoveries of more than 11 billion barrels of oil and gas for Guyana with daily production being around 600,000 bpd from three FPSOs, Liza Destiny, Liza Unity and Payara.
