Chevron Readies for Quick Hess Deal Closing Amid Exxon Dispute

Chevron is preparing for a quick closing of its deal to acquire Hess Corporation, pending regulatory approvals. The company is also awaiting the outcome of a dispute with ExxonMobil over a natural gas field in the Gulf of Mexico. Hess specializes in crude oil and natural gas exploration and production, with operations in the US, Guyana, and Malaysia.

Chevron Corporation (CVX) is poised to close its acquisition of Hess Corporation (HES), pending regulatory approvals. However, the deal's fate is currently uncertain due to a dispute with Exxon Mobil Corporation (XOM) over a natural gas field in the Gulf of Mexico. The outcome of this arbitration could significantly impact Chevron's long-term strategy and financial performance.

The arbitration, being handled by the International Chamber of Commerce (ICC), is reviewing a decision that will determine whether Chevron can proceed with the acquisition. The decision, which remains confidential, will be shared with the involved parties soon. Neither the ICC, Hess, nor Chevron has commented publicly, but Exxon has expressed confidence in its position [1].

The core of the conflict lies in Hess' 30% stake in the Stabroek block, a massive offshore oilfield in Guyana. This block is operated by Exxon (45%) and involves China's state-owned firm CNOOC. Chevron's acquisition of Hess would grant it access to this significant asset, which is crucial for bolstering its declining reserves. In 2024, Chevron's reserve replacement ratio (RRR) fell to -4, indicating that reserves are depleting faster than they can be replenished [1].

Exxon and CNOOC claim that their existing joint venture agreements grant them a right of first refusal on Hess' stake. Chevron and Hess, however, argue that this clause does not apply in full corporate mergers like theirs. The arbitration will decide whether Chevron can finalize the acquisition or if Exxon and CNOOC have the right to block the deal and potentially purchase the stake themselves [1].

Meanwhile, Chevron is also awaiting the outcome of a dispute over a natural gas field in the Gulf of Mexico. Exxon has discovered a significant natural gas reservoir at a depth of 1.9 kilometers in the Pegasus-1 well off the coast of Cyprus. This discovery is the second gas find in Block 10 by partners ExxonMobil and QatarEnergy [2].

Chevron's CEO, Mike Wirth, has positioned the Hess acquisition as a critical component of the company's strategy to revitalize its performance. A favorable ruling in the arbitration would secure Chevron's position in one of the world’s most promising oil plays. However, a loss could derail one of the biggest oil deals in recent history [1].

References:
[1] https://www.nasdaq.com/articles/final-decision-reached-chevrons-disputed-hess-acquisition
[2] https://www.business-standard.com/companies/news/exxonmobil-discovers-new-offshore-natural-gas-reservoir-near-cyprus-125070701176_1.html