Chevron closes Hess acquisition after winning Exxon legal battle
Chevron CEO Mike Wirth's strategy to turn around his company's lagging performance hinged on the acquisition, one of the largest energy deals in the past decade. The prize is a stake in the prolific Stabroek Block off the coast of Guyana that holds more than 11 billion barrels of oil and is one of the fastest growing oil provinces in the world.
Shares in Chevron rose 3% in premarket trading, while Hess stock jumped 7%. Exxon shares were marginally lower.
"This merger of two great American companies brings together the best in the industry," Wirth said in a statement.
Exxon and China's CNOOC, Hess' partners in Guyana, had filed arbitration disputes that claimed they held a pre-emptive right to purchase Hess' stake, which delayed Chevron's closure of the Hess acquisition for over a year.
"We disagree with the International Chamber of Commerce (ICC) panel's interpretation but respect the arbitration and dispute resolution process," Exxon said in a statement.
"Given the significant value we've created in the development of the Guyana resource, we believed we had a clear duty to our investors to consider our preemption rights to protect the value we created through our innovation and hard work at a time when no one knew just how successful this venture would become," the company added.
There is no appeals process at the International Chamber of Commerce, the court that oversaw the arbitration case.
CNOOC did not immediately respond to Reuters' requests for comment.
Even as it awaited the arbitration verdict, Chevron was making preparations so it could close the deal with Hess within 48 hours of resolving the arbitration and complete other operational tasks within 45 days, Reuters previously reported.
Information technology workers from Chevron and Hess have met regularly to plan the integration, and Hess employees were informed that they could request a severance package following the deal's close.
The claims from Exxon and CNOOC had kicked off a lengthy legal battle that captured the attention of the global oil industry, shareholders, and attorneys who craft joint operating agreements that govern oil partnerships around the world.
The dispute centered on the interpretation of just several words in the confidential joint operating agreement between Exxon, Hess and CNOOC, experts have told Reuters.
CNBC, which first reported the news of Chevron's win, cited an interview with Exxon CEO Darren Woods, who said the company was examining the ruling to determine whether to make provisions in contracts to ensure they prevail in future disputes.
CNBC also reported Woods said that Exxon's relationship with Chevron in other projects around the world was fine throughout the arbitration proceedings.
"This was never a Chevron thing. This was more about getting the contracts enforced the way they were intended," Woods told CNBC.
The fight illustrates the value of the Stabroek Block, which drove profits for the Exxon-led consortium that controls all of its oil output, transformed Guyana into one of the world's fastest-growing economies and still has potential for further oil discoveries.
Hess' earnings from Guyana rose to $3.1 billion last year from $1.9 billion in 2023.
Chevron's adjusted earnings last year totaled $18.3 billion, down from $24.7 billion in 2023.
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