Speaking publicly for the first time on ExxonMobil’s pursuit of an arbitration case that could block Chevron’s purchase of Hess, CEO Darren Woods said Exxon’s objective is to establish it has rights over Hess’ Guyana assets, not to buy the company itself.
“We’re basically standing up for what we believe is a fundamental right,” Woods told Reuters at the CERAWeek energy conference in Houston. Exxon is trying to “secure and confirm the rights in that contract gives the existing partners.”
Chevron announced the agreement with Hess Corporation in October last year, to acquire all of the outstanding shares of Hess in an all-stock transaction valued at US$53 billion. The 30% stake held by Hess in the Stabroek Block is a big part of the reason Chevron is pursuing the purchase.
Following the announcement, ExxonMobil filed for arbitration to retain pre-emption rights in the block. The Stabroek Joint Operating Agreement (JOA) outlines terms for the partnership between Hess, ExxonMobil and CNOOC for the exploration and development of the acreage. This agreement includes a Right of First Refusal (ROFR) provision, essentially a contractual right that allows one party the right to buy out the stake of another in the event of a ‘change of control’ transaction.
According to Reuters, Exxon does not rule out acquiring Hess’ entire 30% share in the Stabroek Block. Exxon first wants to establish that it holds preferential rights over Hess Guyana’s asset, Woods said. Then it aims to determine the Hess asset’s value with partners before considering if it makes sense for Exxon to shoulder the investment required for holding a larger share of the block, the CEO said.
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“We’ve got to get past the first hurdle, which is an alignment, an agreement that a preemption right exists in the contract,” Woods said. He left open the possibility of an offer for some or all of the stake.
“I don’t feel locked into a 75% number,” the sum of Exxon and Hess’s current stakes, Woods said. “That is one of the options. And one of the considerations with that option would be the capital requirements that we comfortable with.”
Reuters said a Chevron spokesman did not reply to request for comment on Woods’ remarks.
