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Hess Shareholders will vote on the New York-based oil company’s upcoming takeover on Tuesday Chevron The $53 billion deal comes as the two companies become embroiled in a Exxon Mobil.
The pending deal is in jeopardy as Exxon Mobil claims to have first refusal rights over Hess’ assets in Guyana under a joint operating agreement that manages a large offshore oil block known as the Stabroek Block.
Hess owns 30% of the Stabroek block, while ExxonMobil leads development with a 45% stake. China National Offshore Oil Corporation holds the remaining 25% stake in the field.
ExxonMobil filed for arbitration in March to defend its claims under the joint operating agreement. Chevron and Hess told investors that the pending deal would be terminated if Exxon prevailed in the dispute.
Institutional Shareholder Services called on Hess shareholders to abstain from voting on the merger agreement in order to learn more details about how long the arbitration proceedings will take.
ISS said Chevron and Hess did not immediately notify shareholders of the risks posed by the joint operating agreement and waited months after the deal was announced. According to ISS, Hess shareholders would be at risk if the deal were terminated because Chevron would not be obligated to pay a termination fee.
Shareholders are also not entitled to Chevron dividends during the arbitration process, according to ISS. Hess touted the dividend as one of the key benefits of the deal, ISS reported.
Glass Lewis, on the other hand, recommended that shareholders vote in favor of the deal. The company acknowledged that the dispute with ExxonMobil has created uncertainty but said “overall, the strategic and financial merits of the proposed merger are sound and reasonable.”
Before the vote, Hess shares were trading at about $152, meaning the trading spread has widened since the deal was announced. That suggests some investors are worried about the risks of the deal.
The Chevron-Hess deal was originally scheduled to close in the first half of 2024, but that timeline has been pushed back due to a dispute with Exxon Mobil. Chevron Chief Executive Mike Wirth told analysts on a conference call last month that Hess had asked the arbitration court to rule in the fourth quarter, which should allow the companies to “complete the transaction shortly.” .
Exxon Mobil CEO Darren Woods told CNBC in April that he expected the arbitration to drag on into 2025. Woods said ExxonMobil is seeking to confirm its rights under the joint operating agreement and ascertain the value of Hess Guyana’s assets under the deal.
Chevron has repeatedly insisted that Exxon’s claims under the joint operating agreement do not apply to its acquisition of Hess. But Woods is confident his company will prevail in arbitration, telling CNBC last month that the oil giant signed the agreement.
If Exxon prevails in the dispute and the Chevron-Hess deal is terminated, Hess will remain an independent company and retain its stake in the Stabroek block.
The Chevron-Hess deal also faces scrutiny from the Federal Trade Commission. Voss said he expected the FTC review to be “substantially complete” by the middle of this year.
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