ExxonMobil has filed for arbitration to retain pre-emption rights in the prolific Stabroek Block, Bloomberg reported. This comes as Chevron pursues its acquisition of Hess which has a 30% interest in the Guyana asset.
The publication said Exxon’s Senior Vice President Neil Chapman announced the filing with the International Chamber of Commerce (ICC) in Paris, during a Morgan Stanley conference.
As Exxon pursues the right to be offered Hess’ stake in the Stabroek Block first, billions in bets hang in the balance. Bloomberg said several hedge funds have made wagers pegged to the closing of Chevron’s US$53 billion deal to acquire Hess.
The Stabroek joint operating agreement (JOA) outlines terms for the partnership between Hess, ExxonMobil and CNOOC for the exploration and development of the Stabroek Block. This agreement includes a right of first refusal (ROFR) provision, essentially a contractual right that allows the parties the right to buy out the stake of one of them in the event of a ‘change of control’ transaction.
Chapman is quoted as saying “We understand the intent of this language of the whole [contract] because we wrote it… The Chevron-Hess transaction, what it really did, is it attempted to circumvent the commercial purpose” of the agreement.
He said Exxon is very confident in its position.
The acquisition of Hess by Chevron would completely fall apart if Chevron can’t have the company’s Guyana stake. Chevron, according to Bloomberg, has said it would cancel the entire deal if the stake is not included in the transaction.
While Chevron hoped to close the deal by the middle of the year, Chapman said arbitration at the ICC could take months, as reported by Bloomberg.
“What Chevron and Hess have said is that if pre-emption rights exist, there’s no transaction,” Chapman is quoted as saying. “We’re going to arbitrate to make sure we secure our pre-emption rights. If there is pre-emption, and we do have the opportunity, then what we would do is we would look at the potential values, see if it’s accretive to our portfolio, see if it’s accretive to us as a shareholder and then decide.”
