Chevron Secures $53 Billion Acquisition of Hess After Legal Battle with Exxon Mobil

After a landmark legal battle against rival Exxon Mobil, Chevron has emerged victorious in its pursuit of the largest oil discovery in decades. The $53 billion acquisition of Hess will proceed, marking a significant milestone for the energy giant.

Following the arbitration outcome, shares of Chevron saw a 3.6% increase in premarket trading, while Hess gained nearly 7.4%. On the other hand, Exxon Mobil shares were up by 0.3%.

CNBC was the first to report the arbitration outcome, with an Exxon Mobil spokesperson confirming to Reuters that Chevron had prevailed in the mediation over Guyana oil assets. Both Chevron and Hess have yet to provide a comment on the matter.

Key Victory for CEO Mike Wirth

The successful acquisition is seen as a vindication for CEO Mike Wirth’s strategy, particularly as Hess’ most valuable asset is its stake in the prolific Stabroek Block off the coast of Guyana. This block holds over 11 billion barrels of oil and is considered a significant source of growth for Chevron as it aims to improve its performance.

Last year, Exxon and China’s CNOOC filed arbitration claims against Hess, arguing for a right-of-first-refusal to buy Hess’ 30% interest in the joint venture. Chevron and Hess countered by claiming that this right did not apply to the sale of the entire Hess company.

Implications for the Oil Industry

The legal battle surrounding the Stabroek Block delayed Chevron’s acquisition by at least a year and attracted widespread attention within the global oil industry. The dispute revolved around the interpretation of specific terms in the joint operating agreement between the involved parties.

Despite the challenges, the value of the Stabroek Block remains undeniable. The block has been a significant revenue driver for the Exxon-led consortium, transforming Guyana into a rapidly growing economy and still holding potential for further oil discoveries.

Financial Impact

Hess’ earnings from Guyana saw a substantial increase, rising to $3.1 billion last year from $1.9 billion in 2023. Meanwhile, Chevron’s adjusted earnings for the same period totaled $18.3 billion, down from $24.7 billion in 2023.

Even before the arbitration verdict, Chevron had been preparing to expedite the deal closure and complete operational tasks within a specified timeframe. The company’s proactive approach reflects its commitment to swiftly move forward with the acquisition.

(Reuters – Reporting by Sheila Dang in Houston and Arunima Kumar in Bengaluru; Editing by Anil D’Silva)