"FTC to Approve Chevron-Hess Merger"... Oil Giant Expands Its Size

$53 Billion (Approx. 72 Trillion KRW)
ExxonMobil Files Lawsuit Claiming Veto Rights

The U.S. Federal Trade Commission (FTC) is expected to approve the acquisition of U.S. energy company Hess by oil giant Chevron, major foreign media reported on the 23rd (local time).

Sources said the FTC is expected to approve the $53 billion (approximately 72 trillion won) merger and acquisition (M&A) deal proposed by Chevron for Hess within this week. However, since there is an arbitration lawsuit filed by competitor ExxonMobil, the final outcome remains to be seen. The hearing for the lawsuit is scheduled for May next year.

[Image source=Reuters Yonhap News]

Earlier, Chevron announced the acquisition of Hess in October last year to secure oilfield 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 offshore oilfield in Guyana, an emerging oil-producing country in South America.

Hess approved Chevron's acquisition proposal at a special shareholders' meeting in May, but ExxonMobil and China National Offshore Oil Corporation (CNOOC), consortium partners in the Guyana oilfield, opposed the sale of Hess's shares to a third party and put a brake on the deal. The combined revenue earned last year by the three consortium members from the Guyana offshore oilfield, estimated to contain at least 11 billion barrels of oil and gas, exceeded $11.2 billion.

ExxonMobil, which holds a 45% stake in the consortium, claims it has a right of first refusal on the sale of the oilfield rights and requested arbitration at the International Chamber of Commerce in Paris last March. However, Chevron argues that the right of first refusal does not apply to corporate sales and disputes ExxonMobil's claim. Chevron and Hess expect a ruling on the arbitration lawsuit by August, while ExxonMobil anticipates it by September at the latest.

Bloomberg noted, "Chevron's acquisition of Hess will be the largest M&A deal in the oil industry in recent years." Previously, ExxonMobil acquired shale oil driller Pioneer Natural Resources for $60 billion in May.

Meanwhile, on the New York Stock Exchange that day, the stock prices of Chevron and ExxonMobil both rose by over 1% compared to the previous session, closing at $147.54 and $117.36 respectively. Hess's stock closed slightly higher at $135.34.