Chevron prepares for a quick closure of the Hess deal while awaiting the outcome of Exxon's dispute
According to two industry analysts and sources, Chevron has begun preparing for the acquisition of Hess. This includes a severance package for certain Hess employees. Both companies are preparing for a possible legal challenge by Exxon Mobil, which could make or break a $53 billion deal.
Mike Wirth, CEO of Chevron, is adamant that the Hess purchase be completed. Chevron will gain Hess’ 30% stake in the Stabroek block of Guyana oilfield, operated by Exxon, and containing more than 11 billion bbls. equivalent. This would be a significant addition to Chevron’s declining oil reserves.
According to an internal organizational chart, Chevron has assigned roles to its IT team that will work on Hess Integration.
In recent months, members of the team met with their counterparts from Hess to plan the logistics for the merger of the two companies. A Chevron employee who attended the meetings and another source familiar with them confirmed this. The sources refused to give their names when discussing confidential work.
The second source stated that representatives from Chevron also attended several town hall meetings with Hess employees.
Hess staff were told they can request a severance if they don't want to work for the combined company. This was stated in a notice sent to employees. Chevron, which is undergoing a restructuring and will be laying off as much as 20% of its employees by the end of 2020, had approximately 1,800 Hess employees. Chevron is preparing to meet ambitious closing targets. One source said that the company wants to complete the operational aspects of the acquisition in 45 days and legally close the deal within 48 hours after the arbitration is resolved.
Typically, it can take several months to complete an acquisition once a deal has been announced. Exxon announced its intention to buy Pioneer Natural Resources by October 2023, and the deal was closed in May of last year.
In a recent statement, a Chevron representative said: "We are looking forward to the completion of the transaction and to welcoming Hess into our company."
Hess refused to comment.
Chevron originally expected to complete the Hess purchase in the first half 2024. This was due to the arbitration claims of Exxon, CNOOC and the other minor partner in the Guyana Joint Venture, who claim that they have the contractual right to first refusal to buy Hess' stakes in the Stabroek Block.
Hess, Chevron and others argue that the clause doesn't apply to the entire company. According to the contract, if they lose arbitration or cannot agree on a resolution acceptable to Exxon and CNOOC the acquisition will fail. Biraj Borkhataria met with Eimear Bonner, Chevron's Chief Financial Officer, in June. The analyst said that the executive admitted the long-running arbitration dispute had impacted the stock price of the company, but said it also allowed time for integration planning. Bonner stated
Borkhataria, in an interview, said that Chevron would be able to close the deal very quickly once the arbitration dispute was resolved.
The three-member panel of arbitrators that examined the dispute regarding the Stabroek Block has made a decision. This was reported by the media on Thursday. The Paris-based International Chamber of Commerce overseeing the arbitration is reviewing the decision now before it's released to the parties. Sheila Dang, Houston reporter; David Gregorio, Houston editor
(source: Reuters)
