Final Decision Reached on Chevron's Disputed Hess Acquisition

Chevron Corporation CVX is on the cusp of a transformative opportunity as the arbitrators handling the dispute between Exxon Mobil Corporation XOM and Hess Corporation HES over its planned $53 billion acquisition of the latter. While the ruling remains confidential for now, this will determine whether Chevron can proceed with its acquisition and gain access to one of the world’s most prolific oilfields in Guyana.

The Paris-based International Chamber of Commerce (“ICC”), which is overseeing the arbitration, is currently reviewing the decision before it is shared with the involved parties. Neither the ICC, Hess, nor Chevron has commented publicly, though Exxon has expressed confidence in its position and gratitude to the arbitration panel for diligence.

Guyana’s Stabroek Block at the Center of the Conflict

Chevron’s bid for Hess was largely motivated by the latter’s 30% stake in the Stabroek block — a massive offshore oilfield in Guyana operated by Exxon (45%) and involving China’s state-owned firm CNOOC. The Stabroek block is a crown jewel in global oil exploration, making it a critical asset in Chevron’s strategy to bolster declining reserves and enhance long-term growth. In 2024, CVX's reserve replacement ratio (“RRR”) fell to -4, signaling that reserves are depleting faster than they can be replenished. This declining reserve raised concerns, making Hess’ Guyana assets crucial to Chevron’s prospects.

However, both Exxon and CNOOC have claimed that their existing joint venture agreements grant a right of first refusal on Hess’ stake. Chevron and Hess, on the other hand, argue that the clause does not apply in this case. Both companies maintain that the right of first refusal is triggered only in direct asset sales, not in full corporate mergers like theirs.

Future of the Deal Hangs in the Balance

The outcome of the arbitration will decide whether Chevron, currently carrying a Zacks Rank #3 (Hold), can finalize the acquisition or if Exxon and CNOOC have the right to block the deal and potentially purchase the stake themselves. For Chevron CEO Mike Wirth, whose strategy hinges on revitalizing its performance through this acquisition, the implications are massive. A favorable ruling would secure Chevron’s position in one of the world’s most promising oil plays. However, a loss could derail one of the biggest oil deals in recent history.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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