ExxonMobil Arbitration Could Stop Chevron/Hess Merger For US$53 Billion

(CTN News) – During the US$53 billion merger with ExxonMobil, ExxonMobil filed for arbitration to prevent Chevron from acquiring Hess’s 30% stake in Stabroek.

The Stabroek block is located approximately 200 kilometers offshore of Guyana and is operated by ExxonMobil. It comprises 6.6 million acres (26,709 km2).

More than 11 billion barrels of oil equivalent are estimated to be recoverable from this reservoir. Approximately 45% of the block is owned by ExxonMobil, 30% by Hess, and 25% by China National Offshore Oil Corporation (CNOOC).

It was Chevron’s intention to acquire Hess in order to gain access to this “extraordinary asset with market-leading cash margins”.

In an announcement made earlier this week, ExxonMobil’s senior vice president Neil Chapman disclosed the company’s decision to seek arbitration. During Morgan Stanley’s Energy and Power Conference, he spoke.

In a 2015 joint operating agreement (JOA) for the Stabroek block, Chapman accused Chevron and Hess of attempting to circumvent its commercial purpose.

There is a claim that the JOA provides pre-emption rights for the other partners if any partner wishes to sell, recognizing both asset transactions and parental transactions that would include the block.

By exercising these rights, Hess would ensure that in the event of a sale, its stake would first be offered to its partners before being offered to a third party.

According to Chapman: “We are extremely confident that pre-emption rights exist in this contract…We filed for arbitration in an effort to protect those pre-emption rights, and we believe that is very important for our company and for the industry as well.”. This decision sets a precedent.”

It is noteworthy that Stabroek partners took on “tremendous” exploration, commercial, and financial risks, which have ultimately resulted in significant value for Guyana as well as the partners.

It is important that we realize the value we have created, he said. The chairman stated that, if given the opportunity, ExxonMobil would consider the value offered by Hess’s 30% stake prior to making a decision.

Hess and Chevron, however, claim that pre-emption rights do not apply. Braden Reddall, Chevron spokesperson, stated that the company remains fully committed to the transaction. I am looking forward to the closing of the transaction.”

Although Chevron has warned that it will not complete the merger with Hess if arbitration does not find in its favor.

Arbitration will take place through the French based International Chamber of Commerce.

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