Govt. backs Chevron over ExxonMobil for Hess shares

May 28, 2024 News

….Pres. Ali says Exxon’s dominance could raise competition concerns

(Financial Times) – President Irfaan Ali has said he would welcome Chevron joining the ExxonMobil-led consortium that operates the country’s US$150bn-plus offshore oil project ahead of a crunch vote by Hess shareholders on Chevron’s controversial takeover bid.

President Irfaan Ali

In October, Chevron offered US$53bn to buy Hess, in part to gain a foothold in Guyana’s Stabroek Block, one of the most lucrative oil discoveries in recent decades. Hess owns 30 per cent of the project. Irfaan Ali told the Financial Times his government was keen to attract the world’s largest oil companies, such as Chevron, to develop its resources and suggested any move by Exxon to increase its stake in the project could raise competition concerns. The Chevron-Hess deal erupted into a clash between the US’s two biggest oil companies after Exxon filed an arbitration claim arguing it had a right of first refusal to purchase Hess’s interest in the Guyana project — a move that could boost its own shareholding beyond its current 45 per cent stake. “I wouldn’t use the word nervous,” Ali said when asked whether he was anxious about the possibility of Exxon gaining a more dominant stake in the project.

He noted that consolidation in other sectors that led to one business controlling more than half of the market “can cause concern”, saying: “We are of the view that the partnership works well.” Ali said the proposal to bring in a major new partner into the consortium was a matter for the existing partners, but added that he thought it would be good to have the “largest operators from the US operating in Guyana”. Exxon has indicated it does not intend to make a counterbid for Hess. However, chief executive Darren Woods has said acquiring the smaller company’s full 30 per cent stake in the Guyana venture would be “one of the options’‘ if its pre-emption claims are established. The Guyanese president’s comments come ahead of a pivotal vote by Hess shareholders on Tuesday on whether to accept the Chevron offer. The vote is expected to be tight as a growing number of investors express concerns over the deal. Institutional Shareholder Services, a leading proxy adviser, has told investors to abstain, calling for a pause on the merger until more details on the arbitration process emerge. Glass Lewis, another prominent proxy adviser, has called for a vote in favour.

Three shareholders — HBK Capital Management, DE Shaw and Pentwater Capital Management — have said they will abstain. The funds have a combined holding of about 6 per cent of Hess stock. The company’s biggest shareholders — Vanguard, BlackRock and State Street — declined to say how they would vote. “The vote will be close,” said Frederic Boucher, risk arbitrage analyst at Susquehanna Financial Group. “If it’s close but not quite above the 50 percent threshold. Perhaps Hess will adjourn the May 28 vote and introduce a [compensation payment] or something similar to get over the finish line.” Ali has been criticised in Guyana for failing to renegotiate the Stabroek production-sharing agreement signed by the previous government with Exxon, Hess and China’s Cnooc. Oil contract experts have dubbed it an “unusually sweet deal”. Ali said the contract was “skewed in favour of Exxon” but the government had decided not to seek renegotiation because “sanctity of contract” was important. Becoming embroiled in a legal battle with a “huge company” such as Exxon would be damaging for the entire oil sector, he added.

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Chevron, ExxonMobil, Financial Time, Hess, President Irfaan Ali

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