Chevron Successfully Completes Acquisition of Hess, Including Stake in Exxon’s Stabroek Block
Despite objections from ExxonMobil, Chevron has completed its planned acquisition of privately-held rival Hess, including a 30 percent stake in Exxon’s lucrative Stabroek Block developments off Guyana.
Exxon attempted to block the Hess acquisition by filing an arbitration case through the International Chamber of Commerce. Hess’s contract for the ownership of the Stabroek Block lease included a clause providing right of first refusal to Exxon in the event of a sale of Hess’ stake; Exxon insisted that this clause applied in the event of the sale of Hess itself. Chevron disagreed and argued.
On Friday morning, Exxon lost its arbitral case, and Chevron completed the process of closing on the acquisition of Hess within four hours of the arbitration panel’s announcement. Chevron CEO Mike Wirth celebrated the win, thanking the arbitral panel for recognizing the “longstanding practice and understanding that asset-level rights of first refusal do not apply in parent company merger and acquisition transactions.”
Exxon has accepted the reality that – despite its objections – Chevron is its new business partner in the Stabroek Block project. “We disagree with the ICC panel’s interpretation but respect the arbitration and dispute resolution process,” Exxon said in a statement. “We welcome Chevron to the venture and look forward to continued industry-leading performance and value creation in Guyana.”
The Stabroek Block: A Game-Changer in Offshore Exploration
The Stabroek Block is one of the world’s most promising offshore finds and is a powerhouse behind Exxon’s profit margins. The IEA predicts that it will singlehandedly produce one percent of the world’s oil in future years. Even with the high cost of offshore operations, the first four Stabroek FPSOs will produce oil at a breakeven cost of less than $35 per barrel, according to independent estimates – meaning that even in an era of low oil prices, the projects will still be profitable.