Exxon Considers Pre-Emption Rights to Hess’ Guyana Oil Stake

(Bloomberg) — Exxon Mobil Corp. and Cnooc Ltd. are considering exercising rights to acquire Hess Corp.’s stake in a giant offshore oil development in Guyana, a move that could break up Chevron Corp.’s $53 billion deal to buy into the field.

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Chevron is adamant there’s “no possible scenario” Exxon or Cnooc could buy the stake, and said in a statement that it remains fully committed to the Hess deal. But Exxon said it has a duty to its shareholders to explore the right of first refusal over the change of ownership of the Hess stake. Hess shares slid 3.3% to $144.96 at 6:32 p.m. in late New York trading.

The moves hold the potential to kick off a high-stakes battle for the fastest-growing and largest oil discovery of the past decade and the main reason Chevron struck a deal to buy Hess in October. Exxon, the operator of the project, first found oil in Guyanese waters in 2015 and has since discovered 11 billion barrels of reserves. The company expects production there to double to 1.2 million barrels a day by 2027.

“We owe it to our investors and partners to consider our pre-emption rights in place under our Joint Operating Agreement to ensure we preserve our right to realize the significant value we’ve created and are entitled to in the Guyana asset,” Exxon said in a statement Monday.

Cnooc didn’t immediately respond to an emailed request for comment.

The dispute over Guyana’s Stabroek Block underscores how important the emerging basin is to global crude markets. Oil majors have struck a flurry of megadeals in recent months to secure stakes in proven reserves without building new projects that would increase global supplies.

Exxon and Cnooc’s right of first refusal is “not applicable” to its merger with Hess, Chevron said in an emailed statement. “As described in the S-4, there is no possible scenario in which Exxon or Cnooc could acquire Hess’ interest in Guyana as a result of the Chevron-Hess transaction.”

Still, the company warned in a regulatory filing Monday there’s a risk the deal may not be completed if if Exxon and Cnooc launch a successful counterbid.

“If these discussions do not result in an acceptable resolution, and arbitration (if pursued) does not result in a confirmation that such right of first refusal provision is inapplicable to the merger, then there would be a failure of a closing condition under the Merger Agreement, in which case the merger would not close,” Chevron said.

–With assistance from Dan Murtaugh.

(Updates with Chevron’s comment starting in second paragraph.)

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