How one clause sparked Exxon-Chevron feud that turned personal
(Bloomberg) — The 20-month feud between the Western Hemisphere's two most powerful oil companies over the biggest offshore discovery in a generation hinged on a single clause of a contract few people have ever seen.
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The passage in a confidential agreement signed more than a decade ago that governs how producers work together in Guyana's booming oil field was the basis for Exxon Mobil Corp.'s arbitration case that threatened to undo Chevron Corp.'s $53 billion takeover of Hess Corp.
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The ensuing dispute upended Chevron's and Hess's strategies for nearly two years and threatened to mar the legacies of both companies' CEOs. The story behind how it unfolded shows how American oil executives' usual cordial relationships were pushed to the breaking point when a $1 trillion discovery was at stake.
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'It should have been resolved much quicker,' Chevron CEO Mike Wirth said in an interview Friday. 'This was a straightforward, plain reading of a contract.'
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'We had a clear duty to our investors to consider our preemption rights to protect the value we created,' the company said in a statement. 'We welcome Chevron to the venture.'
The following account is based on Bloomberg reporting over nearly two years, including on- and off-the-record conversations with more than two dozen analysts, fund managers, traders and current and former company employees.
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It began toward the end of 2023, when the US oil industry was basking in the aftermath of the price surge caused by Russia's invasion of Ukraine. In a blow to the clean-energy transition, the war had underscored the continued importance of fossil fuels and furnished producers with record profits.
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Keen to take advantage, US executives embarked on a corporate takeover spree that would reach nearly $500 billion over just three years. Exxon scored the biggest of them, buying Pioneer Natural Resources Co. for $60 billion in October 2023.
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Not to be outdone, Chevron announced an agreement to buy Hess for $53 billion less than two weeks later. Hess's minority stake in Guyana's massive Stabroek Block was 'the industry's most attractive, long-lived growth asset' Wirth said on the day of the announcement. It was high praise for a project discovered and operated by its arch-rival, Exxon.
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