Chevron has $60 billion riding on 11 words detailing a big dispute with Exxon

The interpretation of an agreement governing some key Guyanese assets underpins its merger with Hess

By Melvin Backman2 min readUpdated April 3, 2024

In October, Chevron $CVX said it would be buying Hess in a deal worth $60 billion. One of the crown jewels of the acquisition is Hess’s share in “the Stabroek block in Guyana,” a massive, 11 billion-barrel oil discovery in the Caribbean, which Chevron flaunted as “an extraordinary asset with industry leading cash margins and low carbon intensity that is expected to deliver production growth into the next decade.” Unfortunately, a bigger share in the project belongs to ExxonMobil $XOM, Chevron’s biggest American rival.

At first, Exxon was outwardly cool with sharing Stabroek. “We work with Chevron all around the world,” Exxon CEO Darren Woods told Bloomberg a couple weeks after Chevron announced the Hess deal. But it has changed its tune.

In a 400-plus page document filed with the Securities and Exchange Commission late last week, Chevron outlines the deal for Chevron and Hess shareholders. In it, the oil giant mentions that the agreement governing the Strabroek block has a right-of-first-refusal provision that — this is key — “if applicable to a change of control transaction and properly exercised,” could actually mean that Chevron doesn’t get Hess’s share.

Bloomberg reports that the case will be going to arbitration in France soon. Some analysts suggest that more than 80% of the value of the Hess acquisition is tied up in the Stabroek rights, and if things don’t go Chevron’s way, its future could be on the line.

Chevron doesn’t think the contract language applies, and it said that the Hess subsidiary in charge of its Stabroek interests “intends to vigorously defend its position in the arbitration proceedings and expects the arbitration tribunal will confirm that the Stabroek ROFR does not apply to the merger.” But if it does, “there would be a failure of a closing condition under the merger agreement, in which case the merger would not close.”

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