Hess shares drop as fight with Exxon Mobil over Guyana oil threatens Chevron takeover

Hess Corp shares fell Tuesday after Chevron warned investors that a dispute with Exxon Mobil and China’s National Offshore Oil Corp. (Cnooc) over Guyana’s offshore oil assets could jeopardize its bid to acquire the company.

Hess was down nearly 4% in morning trading Tuesday. Chevron shares fell more than 2%.

Chevron entered an agreement to purchase Hess for $53 billion in an all-stock transaction in October — a play to gain a foothold in Guyana’s massive offshore oil assets.

Hess has a 30% stake in a consortium with Exxon and Cnooc to develop Guyana’s Stabroek oil block, which is estimated to contain more than 11 billion barrels of oil equivalent.

But Chevron warned investors in a filing late Monday that Exxon and Cnooc are claiming they have a pre-emptive right to purchase Hess’s stake in Guyana’s assets under a joint operating agreement should the transaction close.

Chevron said Exxon and Cnooc’s claims could delay or completely derail its acquisition of Hess. Should this occur and the merger fails, Hess would continue to operate as an independent company and retain its stake in Guyana’s assets, according to the filing.

Chevron said in the filing that it does not believe the joint operating agreement applies to its acquisition of Hess. The oil major is in discussions with Exxon and Cnooc in an effort to resolve the dispute.

“We owe it to our investors and partners to consider our pre-emption rights in place under our Joint Operating Agreement to ensure we preserve our right to realize the significant value we’ve created and are entitled to in the Guyana asset,” Exxon said in a statement Monday.
 
Neal Dingmann, an analyst at Truist, told CNBC’s “Squawk Box” on Tuesday that it is unlikely Exxon and Cnooc will scoop up Hess’ Guyana assets.

“I think either the transaction will go through or Hess will take that back,” Dingmann said. “I can’t imagine that Chevron lawyers would have gone down this road if they there was any issue of these pre-emptive rights converting over,” he said.

Dingmann said Exxon and Cnooc could receive a payout to settle the dispute. “I’m sure there is some wiggle room,” the analyst said.

The dispute with Exxon and Cnooc is the latest hurdle that Chevron’s bid to acquire Hess faces. The Federal Trade Commission in December requested more information on the deal, in a sign that federal regulators are reviewing the transaction closely over potential competition concerns.