Hess Shareholders Approve $53 Billion Chevron Merger Amid Exxon Dispute

In a major development within the oil industry, Hess shareholders have approved the company’s $53 billion acquisition by Chevron. This approval marks a significant step forward, though the timeline for closing the deal remains uncertain due to a contentious dispute with Exxon Mobil over Hess’s assets in Guyana.

In March, Exxon initiated arbitration to assert its rights under the agreement. Chevron and Hess have informed investors that if Exxon’s claim is upheld, the Chevron-Hess deal will be terminated. Hess has acknowledged that the completion of the merger is contingent on the arbitration outcome, emphasizing their intention to finalize the merger as soon as possible.

The ongoing arbitration has led to delays, with the original target to close the deal in the first half of 2024 now appearing uncertain. Chevron has expressed confidence that its interpretation of the agreement will be upheld, allowing the merger to proceed. In contrast, Exxon CEO Darren Woods anticipates that the arbitration could extend into 2025, further prolonging the uncertainty.

Hess’s shareholders voted overwhelmingly in favor of the merger, though the exact tally was not immediately disclosed. Despite this approval, the future of the deal hinges on the resolution of Exxon’s claim to a right of first refusal over Hess’s assets in the lucrative Stabroek Block, under a joint operating agreement. This offshore oil patch, where Hess holds a 30% stake, is primarily developed by Exxon with a 45% stake, while China National Offshore Oil Corporation holds the remaining 25%.

Institutional Shareholder Services (ISS) had advised Hess shareholders to withhold their votes until more clarity emerged regarding the arbitration timeline. ISS criticized the delay in notifying shareholders about the risks posed by the joint operating agreement, highlighting that Hess shareholders would bear the risks if the deal terminates, as Chevron is not obligated to pay a termination fee. Moreover, shareholders would miss out on Chevron’s dividend during the arbitration process, which Hess had promoted as a key benefit of the merger.

Conversely, Glass Lewis recommended voting in favor of the deal, acknowledging the uncertainty due to the dispute but affirming the strategic and financial soundness of the proposed merger.