Arbitration hearing on Guyana oil asset set for mid-2025: Chevron, Hess

A hearing has been set for May 2025 for arbitration related to Chevron's proposed $53 billion takeover of Hess Corp., which has been delayed over a claim to right of first refusal by ExxonMobil regarding a Hess-owned asset in Guyana, the two companies said.

A decision is expected within three months of the hearing, Chevron and Hess said jointly in a US Securities and Exchange Commission filing dated July 31.

The long-awaited arbitration relates to the applicability of ExxonMobil's right of first refusal, or ROFR, to Hess' 30% stake in Guyana's Stabroek block which the major company operates. At issue is the applicability of the ROFR contained in an operating agreement among Hess, ExxonMobil and China's CNOOC, which is also a Stabroek partner.

ExxonMobil earlier this year balked over Chevron's bid to acquire Hess, whose Guyana stake was widely viewed as the "crown jewel" of its asset portfolio.

Chevron claims the ROFR does not apply to the joint operating agreement since its offer for Hess was for the entire corporation, not simply the Guyana stake. ExxonMobil has claimed the ROFR does apply to the operating agreement.

Hearing delayed

Chevron and Hess had expected and requested that the hearing be held earlier, the filing said, but the arbitrators' common schedules did not allow for an earlier date.

Hess shareholders approved the merger in late May. At the time, Hess expressed hope the merger might take place soon after the vote. Chevron's CEO Mike Wirth said he had hoped to hear the merits of the cases in the third quarter of 2024 with an outcome in Q4, with the deal closing "shortly thereafter."

Normally during mergers, partners in oil and gas blocks have preemptive or ROFR rights to assure an asset holder that it will not lose the right to the asset if others express interest in it.

The Guyana asset is extremely valuable, as billions of barrels of oil have been discovered there since the first find in May 2015. The Stabroek block is now producing over 600,000 b/d of oil from three FPSOs and four more Stabroek oil projects are in varying stages of construction.

The fourth project is slated to come online in 2025, with the other three starting up at intervals through the end of this decade.

Officially the block holds resources of over 11 billion barrels of equivalent of oil, but that figure has not been updated for nearly two years despite several new finds being made. At current oil prices, the resource value equates to nearly $1 trillion.

When all of the initial seven fields are online in 2029, Stabroek will be producing over 1.5 million b/d of oil. The seventh project, Hammerhead, was greenlighted in July.

The SEC filing "is the first publicly agreed-upon schedule for the timing of arbitration," Jefferies analyst Lloyd Byrne said in a July 31 investor note. "While the delay is not optimal for Chevron and Hess, both management teams affirmed that the delay has no impact on the outcome of arbitration."

"In addition, Chevron management expect to provide an update on FTC [Federal Trade Commission merger approval] with a timeline at Q2 results and noted the timing of the FTC decision is not impacted by the arbitration timing," Byrne said.

Chevron is due to report second-quarter earnings on Aug. 2.

Chevron and Hess announced their merger in October 2023.