Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess - Rigzone News

Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess | Rigzone

Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess

Hess Corp. has said Exxon Mobil Corp.’s preemption right in their joint operating agreement for the Stabroek block should not affect the former’s pending acquisition by Chevron Corp.

The Guyana asset, which has discovered recoverable resources of over 11 billion barrels of oil equivalent, is the main reason behind Chevron’s $60 billion purchase of Hess announced October 23.

But Hess and Chevron confirmed that ExxonMobil, which operates the block with a 45 percent stake through Esso Exploration and Production Guyana Ltd., and the third owner, China National Offshore Oil Corp. (CNOOC) have floated the potential exercise of their right of first refusal in the Stabroek agreement. A right of first refusal or preemption right allows a joint venture partner to prevent a co-venturer from divesting a stake to an outside party without giving the partner a chance to be the buyer. Hess subsidiary Hess Guyana Exploration Ltd. holds a 30 percent interest in the development while CNOOC Petroleum Guyana Ltd. has the remaining 25 percent.

“Chevron and Hess are engaged in constructive discussions with ExxonMobil and CNOOC regarding the applicability of a right of first refusal (ROFR) / pre-emption provision in the Stabroek joint operating agreement”, New York City-based Hess said in a regulatory disclosure.

San Ramon, California-based Chevron said in a separate filing with the United States Securities and Exchange Commission, “Hess, Chevron, Exxon and CNOOC have been engaged in constructive discussions regarding the Stabroek ROFR, and Chevron and Hess believe these discussions will result in an outcome that will not delay, impede or prevent the consummation of the merger”.

Chevron said arbitration is an option should the talks fail. However, it added if the arbitration fails “then there would be a failure of a closing condition under the Merger Agreement, in which case the merger would not close”.

Chevron or Hess may themselves junk the merger agreement if completion is not achieved by October 22, 2024, or if extended, April 22, 2025, or October 22, 2025, under the terms of the merger agreement, Chevron said. “The merger agreement provided for an initial end date of April 18, 2024, but the parties have each waived the right to exercise any termination right available to it with respect to the initial April 18, 2024 end date”, Chevron’s filing stated.

The challenge posed by ExxonMobil and China’s state-owned CNOOC comes as Chevron and Hess work to clear an anti-trust review by the U.S. competition regulator.

U.S. law requires parties in certain acquisitions and mergers to notify the Federal Trade Commission (FTC) and the Department of Justice of the transactions. One of the two agencies then reviews such a transaction for 30 days—called a waiting period—before this can be consummated. If either agency determines during the waiting period that further inquiry is necessary, the Hart-Scott-Rodino Antitrust Improvements Act allows the determining agency to request additional information and documentary materials. This second request extends the waiting period for 30 days after all parties have complied with the initial request, according to a legal guide on the FTC website.

Chevron and Hess received a “second request” from the FTC December 7.

The merger parties “continue to work with the U.S. Federal Trade Commission on its request for additional information and on planning for the integration of our companies”, Hess said in the filing disclosing the engagement with its Stabroek partners ExxonMobil and CNOOC.

To contact the author, email jov.onsat@rigzone.com

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