Exxon Mobil Corp said on Wednesday it has filed a contract arbitration claim contesting Hess Corp's proposed sale of its oil properties in Guyana, and suggested it may oppose Chevron Corp's pending deal for the assets.
The arbitration case seeks to preserve Exxon's right to acquire Hess' 30% stake in the giant Stabroek offshore oil block, senior vice president Neil Chapman said at a conference on Wednesday.
Stabroek, which is considered the biggest oil discovery in decades, is the prize in Chevron's bid for Hess. Exxon made clear for the first time that it would make an offer for Hess' Guyana properties if Chevron proceeds with its proposed $53 billion purchase of Hess.
“I don’t know whether the Chevron transaction will go ahead or not, that’s in their hands,” Chapman said at a Morgan Stanley event in New York. “If there is a transaction, we plan to exercise our preemptive rights,” he said.
Chevron and Hess said they believe the rights do not apply as the transaction would involve a merger with the parent company that would keep Hess' Guyana subsidiary intact.
“We remain fully committed to the transaction and confident in our position. We look forward to closing the transaction on the terms we agreed to,” Chevron spokesman Braden Reddall said in a statement.
Chevron's bid for Hess is "an attempt to circumvent" the joint operating agreement governing the partners' roles in the Stabroek block, Chapman said.
Exxon's challenge could prove fruitful even if it doesn't end up expanding the oil company's holdings, analysts said.
His arbitration request “could be a negotiating position,” said Mark Kelly, CEO of financial firm MKP Advisors. Wednesday's drop in Hess shares "suggests that the market is somewhat happy" with Exxon's position that it is entitled to Hess' stake in Guyana, he said.
Hess shares fell 1.6%, Exxon shares rose 1% and Chevron shares fell a fraction in afternoon trading.
Exxon now holds a 45% stake in the consortium and operates all of its production. If it purchased Hess's stake, it would own 75% of the block.
A contract arbitration case typically takes six months or more, Chapman said.
“Rights of first refusal give us the opportunity to look at value, which we can match if we choose to do so,” Chapman said.
The company has been negotiating with Chevron and Hess over its right of first refusal on any sale of Hess' stake in Stabroek. The country formally filed for arbitration on Wednesday with the International Chamber of Commerce after failing to reach an agreement, he said.
“We, as participants (in the block), have the right to match a reasonable allocation of Hess transaction value,” Chapman said. “Disputes happen all the time and are resolved. The only real difference is that this is in the public domain.”
Exxon's arbitration request raises risks for Chevron, but also adds a new problem to the proposed $60 billion purchase of Pioneer Natural Resources by the largest US oil company. This deal would make Exxon the largest oil producer in the main US oil field.
