Exxon Mobil (XOM) is contesting Chevron’s (CVX) $53 billion acquisition of Hess (HES) based on concerns about whether the deal would result in a change of control of Hess’s prized subsidiary in Guyana. This issue, highlighted in an exclusive Reuters report, is central to Exxon Mobil’s legal challenge.
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Details of Exxon’s Dispute With Chevron
In a legal showdown over Guyana’s largest oil discovery in two decades, ExxonMobil and Chevron are locked in a battle for control.
ExxonMobil, holding a 45% stake in the Guyana oil consortium, believed it had the first right to purchase shares from Hess, another player in the consortium. This right, known as preemption rights, was written into their joint operating agreement (JOA). However, when Chevron moved to acquire a significant 30% stake in the consortium by purchasing Hess’s shares, ExxonMobil claimed they were bypassed. They argued that according to the JOA, Hess should have given ExxonMobil the initial opportunity to buy before agreeing to sell to Chevron.
Furthermore, according to the report, ExxonMobil accused Chevron of arranging the acquisition so that ExxonMobil’s preemption rights wouldn’t be activated.
CVX’s Response to XOM’s Allegations
In response, Chevron and Hess argue that their deal doesn’t count as a change in control because Hess would stay a part of Chevron.
Consequently, the International Chamber of Commerce (ICC) has appointed a three-person arbitration panel to settle the dispute. The panel is expected to focus on interpreting the contract’s language or Chevron’s intentions, which could extend the resolution into next year.
Despite the arbitration, Chevron and Hess are pushing for a hearing on the matter in the third quarter, aiming to finalize the deal by the year’s end. According to Reuters, experts estimate that the Guyana project makes up between 60 to 80% of the $53 billion Chevron offered for Hess.
If Exxon wins, it might lead to more talks or bids for Hess’s part in the Guyana project.
Is XOM Stock a Buy or Sell?
Analysts remain cautiously optimistic about XOM stock, with a Moderate Buy consensus rating based on 11 Buys and six Holds. Over the past year, XOM has increased by more than 20%, and the average XOM price target of $135.13 implies an upside potential of 13.1% from current levels.
