In 2024, Chevron (CVX -0.14%) issued a warning to investors about a potential disruption to its megadeal with Hess (HES 0.57% increase) as Exxon Mobil (XOM 0.39% increase) and China’s Cnooc assert their right to preempt Chevron’s bid for a stake in a prolific oil project off the coast of Guyana.
Background: Chevron’s $53 billion all-stock acquisition of Hess, proposed last year, heavily relies on Hess’s 30% stake in an Exxon-led drilling consortium in Guyanese waters. This partnership has rapidly expanded oil production, with expectations to pump over 1 million barrels a day in the coming years.
Current Situation: Exxon and Cnooc are claiming they have the right to counter Chevron’s offer for Hess’s stake in the Guyana project, which Exxon operates. The dispute revolves around the terms of a joint operating agreement (JOA) signed over a decade ago, governing the consortium. Hess entered the JOA in 2014 when it acquired its stake from Shell.
Chevron’s Response: Chevron is committed to the transaction, stating that there is no scenario where Exxon or Cnooc could acquire Hess’s interest in Guyana as a result of the Chevron-Hess deal. However, the company warned investors that the deal may not be completed within the anticipated time frame, if at all.
Implications: The potential interference by Exxon and Cnooc poses a significant threat to Chevron’s acquisition plans and underscores the complexities and risks involved in large-scale oil acquisitions and the challenges posed by existing agreements and partnerships.
Conclusion: While the outcome of the dispute remains uncertain, it highlights the challenges faced by major players in the oil industry and the importance of navigating complex contractual arrangements in strategic acquisitions.
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