Hess Approves Chevron Acquisition at Shareholders Meeting... Final Merger Uncertain Due to ExxonMobil Obstruction

U.S. energy company Hess approved Chevron's $53 billion (approximately 72 trillion KRW) merger proposal at an extraordinary shareholders' meeting on the 28th (local time). However, the final merger remains uncertain as ExxonMobil, which holds a stake in the core block of the Guyana offshore oil field, opposes the deal.

[Image source=Reuters Yonhap News]

According to Bloomberg and other sources, John Hess, CEO of Hess, stated in a public announcement after the extraordinary shareholders' meeting, "I am very pleased that the majority of shareholders recognize the value of this strategic transaction," adding, "We look forward to the completion of the merger with Chevron."

Earlier, Chevron announced in October last year that it would acquire Hess for $53 billion to secure oil field rights in Guyana, South America. Hess, which operates oil and natural gas exploration businesses, holds a 30% stake in the Stabroek block, a key area of the emerging South American oil-producing country Guyana's offshore oil field. The report described it as "a major victory for Chevron and CEO Mike Wirth, who have been targeting the Guyana offshore oil field."

However, uncertainties remain. ExxonMobil has clearly opposed the sale of Hess's 30% stake in the Guyana offshore oil field to third parties, asserting its right of first refusal as a consortium partner. Regarding this, ExxonMobil already requested arbitration at the International Chamber of Commerce in Paris in March. Another consortium partner, China's CNOOC, has also supported ExxonMobil's claims.

Leading up to this shareholders' meeting, the prospect of abstentions among shareholders due to disputes with ExxonMobil has been increasing. The proxy advisory firm ISS recommended shareholders abstain, stating, "There is a risk that the Hess acquisition could be canceled due to the dispute between ExxonMobil and Chevron." If the acquisition is canceled, Hess would have to pay Chevron a fee of as much as $1.7 billion. Prominent investors, including D.E. Shaw, had already expressed their intention to abstain.

The report stated, "Some major shareholders and ISS urged abstentions in the shareholders' vote," and noted that "arbitration with ExxonMobil over the Guyana offshore oil field is a major obstacle to the merger."

Additionally, some shareholders pointed out that considering the estimated reserves of at least 11 billion barrels of oil and gas in the Guyana offshore oil field, Chevron's valuation of Hess's assets was underestimated. The Wall Street Journal (WSJ) reported that Hess's shareholders estimate the value of the Guyana offshore oil field alone to be over $40 billion.

Currently, Chevron disputes ExxonMobil's claim, arguing that the right of first refusal does not apply to corporate sales. David Deckelbaum of TD Cowen said, "The shareholder vote was a big issue," adding, "The fact that it is over means Chevron is not backing down."

Even if the conflict with ExxonMobil is resolved, variables remain. Chevron must also obtain merger approval from the U.S. Federal Trade Commission (FTC) to acquire Hess. There is a possibility that this process could take longer than expected. However, the market generally expects that the FTC will not block this merger.