Hess requests Stabroek Block shares dispute hearing for 3rd quarter of 2024

The Prosperity FPSO in the Stabroek Block [SBM Offshore photo]

Amid the ongoing dispute between oil giant ExxonMobil and Hess, over its decision to sell its shares to fellow United States (US) oil company Chevron, it turns out that Hess requested the Arbitration Panel to hear the case in the third quarter of this year.

This was revealed by Chevron Chairman and Chief Executive Officer (CEO) Mike Wirth, during a recent first-quarter earnings call. He explained that while timelines on resolving the case and the eventual purchase of Hess’ shares are still unclear, efforts have at least been made to have the case heard and decided in the third and fourth quarter respectively.

“We have the arbitration, which I think is a little less defined at his point in terms of the specific scheduling. This will be established by the arbitration tribunal. In our (submission) we indicated that Hess has asked the tribunal to hear the merit of the case in the third quarter, with an outcome in the fourth quarter. Which would allow us to close the transaction shortly thereafter.”

“We see no legitimate reason to delay that timeline. It’s consistent with what Exxon has outlined they would expect. But can’t say that is exactly how it would unfold. We haven’t seen specific scheduling from the tribunal yet,” Wirth explained.

Back in October 2023, it was announced that Hess Corp. had agreed to merge with Chevron. This deal would allow Chevron to buy into Hess a 30 per cent stake in the oil-rich Stabroek Block, which is operated by ExxonMobil, which has the majority interest of 45 per cent while CNOOC holds the remaining 25 per cent stake.

But in March, ExxonMobil announced that it had filed a case in the International Chamber of Commerce to assert its right of first refusal over Hess’ interest offshore Guyana. While the Chevron/Hess merger could now be delayed in light of Exxon’s arbitration, both Hess Corp and Chevron have for the large part remained confident of the US$53 billion deal going through.

An article published by Bloomberg last month indicated that while the deal may be delayed, Hess Corp. is confident its arguments would prevail in the arbitration case filed by Exxon.

In a previous email to employees, Hess had said “We disagree with ExxonMobil’s interpretation of the agreement and are confident that our position will prevail in arbitration… There is no possible scenario in which Exxon or CNOOC could acquire Hess’ interest in Guyana as a result of the Chevron-Hess transaction.”

According to Bloomberg, this disclosure marks the first time either Hess or Chevron have said Exxon’s push to safeguard its preemption rights in Guyana could delay their merger, initially expected to close by the second half of this year.

It’s also the first time either company has been so explicit about their disagreement over how Exxon is interpreting its joint agreement with Hess and Chinese oil giant CNOOC Ltd. to produce oil off the coast of the South American nation, according to the article.

“We’re confident that within this contract, we have pre-emption rights, and we have filed for arbitration to make sure that we can secure those pre-emption rights… The pre-emption rights are to allow us to look at the value, which we can then match should we choose to do so,” Exxon’s senior vice president Neil Chapman had said at the time, adding that arbitration of this nature typically takes “five to six months”.

Bloomberg had also said in its article that if Exxon succeeds in blocking the takeover, Hess would be required to pay Chevron a $1.7 billion break-up fee. However, both Hess and Chevron have declared their intention to see the deal through.