Chevron will proceed with Hess acquisition after winning Exxon Guyana's legal battle

Chevron is moving forward with its acquisition of Hess for $53 billion after winning a landmark court battle against Exxon Mobil, allowing it to access the biggest oil discovery in decades.

This is a vindication of CEO Mike Wirth’s strategy, and it is a crucial win, since Hess’ most attractive asset is the stake in the Stabroek Block, located off the coasts of Guyana. The block contains more than 11 billion gallons of oil. It will be a source for growth, as Chevron tries to improve its performance.

Hess shares jumped 7.4%, while Chevron shares rose 3.6%. Exxon's shares were slightly lower.

Exxon issued a statement saying that it disagreed with the panel interpretation of the International Chamber of Commerce. However, they respected the arbitration and dispute-resolution process.

The company said that "given the significant value created by our innovation and hardwork in developing the Guyana resource at a time no one could have predicted the success of this venture, we felt we had a duty to our shareholders to consider our rights of preemption to protect the value created."

The International Chamber of Commerce, which supervised the arbitration case, does not have an appeals procedure. Exxon stated in its statement that they respect the arbitration and dispute-resolution process.

CNBC was the first to report on the arbitral result. Exxon Mobil confirmed that Chevron won the arbitration over Guyana's oil assets.

Chevron Hess CNOOC have not responded to our requests for comment.

Exxon, which operates the Stabroek Block with a 45% interest, and China's CNOOC, which holds 25%, filed arbitration claims against their partner Hess last year, arguing they had a contractual right-of-first-refusal to buy Hess' 30% interest in the joint venture. Hess and Chevron claimed that the preemptive right didn't apply to the entire Hess Company.

Exxon's and CNOOC's claims triggered a legal fight that delayed Chevron’s acquisition for at least one year. The case also caught the attention of global oil companies, investors and attorneys who draft joint operating agreements to govern oil partnerships all over the world.

Experts said that the dispute was likely over the interpretation of a few words in the joint operating agreement confidential between Exxon Hess CNOOC.

In May, an Exxon executive stated that the company had worked with Chevron in other countries and would continue to do so in Guyana should the arbitrators rule against Exxon.

The Stabroek Block is a valuable asset that has transformed Guyana's economy into one of the fastest growing in the world. It also holds the potential for more oil discoveries.

Hess's earnings from Guyana increased to $3.1 billion from $1.9 billion by 2023.

Chevron's adjusted profits last year totaled 18 billion dollars, down from 24 billion dollars in 2023.

Chevron began preparing for the closing of the deal in 48 hours after the arbitral decision and completed other operational tasks in 45 days.

(source: Reuters)