Chevron closes Hess acquisition after winning Exxon legal battle

By Sheila Dang

HOUSTON (Reuters) -Chevron closed its $55 billion acquisition of Hess on Friday after winning a landmark legal battle against larger rival Exxon Mobil to gain access to the largest oil discovery in decades.

Chevron CEO Mike Wirth's strategy to turn around his company's lagging performance hinged on the acquisition, one of the largest energy deals in the past decade. The prize is a stake in the prolific Stabroek Block off the coast of Guyana that holds more than 11 billion barrels of oil and is one of the fastest growing oil provinces in the world.

"This merger of two great American companies brings together the best in the industry," Wirth said in a statement. 

Exxon and China's CNOOC, Hess' partners in Guyana, had filed arbitration disputes that claimed they held a pre-emptive right to purchase Hess' stake, which delayed Chevron's closure of the Hess acquisition for over a year. 

"We disagree with the International Chamber of Commerce (ICC) panel's interpretation but respect the arbitration and dispute resolution process," Exxon said in a statement.

"Given the significant value we've created in the development of the Guyana resource, we believed we had a clear duty to our investors to consider our preemption rights to protect the value we created through our innovation and hard work at a time when no one knew just how successful this venture would become," the company added.

CNOOC said it was also disappointed with the ruling.

There is no appeals process at the International Chamber of Commerce, the court that oversaw the arbitration case.

Even as it awaited the arbitration verdict, Chevron was making preparations so it could close the deal with Hess quickly, Reuters previously reported.

Information technology workers from Chevron and Hess have met regularly to plan the integration, and Hess employees were informed that they could request a severance package following the deal's close. 

In an interview with Reuters on Friday, Wirth said converting technology and combining employees from both companies would take a few months.

Shares of Chevron and Exxon were marginally lower in morning trading.

OILFIELD RICHES

The claims from Exxon and CNOOC had kicked off a lengthy legal battle that captured the attention of the global oil industry, shareholders, and attorneys who craft joint operating agreements that govern oil partnerships around the world.

The case illustrates the value of the Stabroek Block, which drove profits for the Exxon-led consortium that controls all of its oil output, transformed Guyana into one of the world's fastest-growing economies and still has potential for further oil discoveries. 

The dispute centered on the interpretation of just several words in the confidential joint operating agreement between Exxon, Hess and CNOOC, experts have told Reuters.

"It didn't have to happen this way," Wirth told Reuters. "We were engaged in good faith conversations, actually for months, which ended abruptly when we were notified that they (Exxon) were going to file for arbitration."

"The outcome is simple and straightforward, as we expected from the beginning."

CNBC, which first reported the news of Chevron's win, cited an interview with Exxon CEO Darren Woods, who said the company was examining the ruling to determine whether to make provisions in contracts to ensure they prevail in future disputes. 

CNBC also reported Woods said that Exxon's relationship with Chevron in other projects around the world was fine throughout the arbitration proceedings.

"This was never a Chevron thing. This was more about getting the contracts enforced the way they were intended," Woods told CNBC.

Hess' earnings from Guyana rose to $3.1 billion last year from $1.9 billion in 2023. 

Chevron's adjusted earnings last year totaled $18.3 billion, down from $24.7 billion in 2023.

(Reporting by Sheila Dang in Houston and Arunima Kumar in Bengaluru; Editing by Anil D'Silva, Louise Heavens and Elaine Hardcastle)