Macro

Exxon's Bold Move Against Chevron's $53B Hess Bid

Exxon's Strategic Bid to Block Chevron's $53 Billion Takeover of Hess Highlights the High Stakes in Guyana's Oil Riches

By Alex P. Chase

2/29, 09:21 EST
S&P 500
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Chevron Corporation
Hess Corporation
Exxon Mobil Corporation

Key Takeaway

  • Exxon Mobil Corp. is contesting Chevron Corp.'s acquisition of Hess Corp. to maintain its dominant stake in Guyana's oil project.
  • The dispute centers on a "right of first refusal" clause, with Exxon aiming to block Chevron from acquiring a 30% stake in the lucrative Stabroek block.
  • If Exxon prevails, it could thwart Chevron's $53 billion takeover bid for Hess, underscoring the high stakes in securing Guyana's vast oil riches.

The Tug of War Over Guyana's Black Gold: Exxon vs. Chevron

In the deep blue waters off the coast of Guyana, a drama worthy of the high seas is unfolding, involving two of the world's oil giants, Exxon Mobil Corp. and Chevron Corp. At stake is control over a treasure trove of oil beneath Guyana's waters, a prize that could redefine the future of energy in the region and beyond. The narrative is not just about corporate rivalry; it's a saga that encapsulates the global race for energy resources, the intricacies of legal contracts, and the strategic maneuvers of industry titans.

Exxon, with a commanding 45% stake in a pivotal offshore oil development project in Guyana, finds itself at a crossroads. The company is contemplating a bold move to acquire Hess Corp.'s stake in the project. This is no mere business transaction; it's a strategic play that could potentially derail Chevron's ambitious $53 billion takeover of Hess. The implications of this power play extend far beyond the boardrooms of these corporations, potentially affecting stock market valuations and the strategic positioning of Exxon and Chevron in the global oil landscape.

Afra Afsharipour, a distinguished law professor at the University of California, weighed in on the significance of the dispute, stating, "This is such a material issue to Hess and its value." The Guyana project is not just another asset; it's a jewel in the crown of the global oil industry, boasting massive reserves, rapid growth potential, and enviable profitability. It's no wonder that both Exxon and Chevron are vying for a larger piece of the pie.

At the heart of this corporate chess game is a private contract between Exxon, Hess, and Cnooc, featuring a "right of first refusal" clause. This clause has become the battleground, with Chevron arguing that its acquisition of Hess should proceed unimpeded, while Exxon insists on exercising its pre-emption rights to safeguard the project's value. The legal and strategic nuances of this clause have sparked a debate that could have far-reaching consequences for all parties involved.

Biraj Borkhataria, an analyst at RBC Capital Markets, shed light on the complexity of the situation, noting, "Exxon/Cnooc can potentially block Chevron from acquiring Hess Guyana, but not necessarily acquire it themselves." The possible outcomes are as varied as they are consequential, ranging from arbitration favoring Chevron to Exxon stepping in to claim Hess's stake. The uncertainty surrounding these scenarios underscores the high stakes of this corporate showdown.

Despite the brewing storm, there's a glimmer of hope for a peaceful resolution. All parties are currently engaged in discussions, hinting at the possibility of a negotiated settlement before the dispute escalates to arbitration. While the likelihood of the deal collapsing is slim, the tension underscores the strategic importance of Guyana's oil reserves in the global energy market.

As this saga unfolds, the eyes of the world are fixed on Guyana's waters, where the future of two oil behemoths and the direction of global energy markets hang in the balance. The outcome of this battle will not only shape the fortunes of Exxon and Chevron but also signal the evolving dynamics of power, influence, and wealth in the quest for the world's most coveted natural resources.

Street Views

  • Biraj Borkhataria, RBC Capital Markets (Neutral on Exxon and Chevron's situation):

    "It appears that Exxon/Cnooc can potentially block Chevron from acquiring Hess Guyana, but not necessarily acquire it themselves. This is what is likely up for debate."