Shares in oil giant Chevron (CVX) climbed higher today after it won a battle with rival Exxon Mobil (XOM) over lucrative oil discoveries in South America.
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A ruling handed down today by the International Chamber of Commerce in Paris dismissed Exxon’s claim over the right to buy a 30% stake in Guyana’s Stabroek oilfield, owned by U.S. energy firm Hess (HES).
Long-Running Saga
Exxon said it disagreed with the ICC panel’s interpretation but respected the arbitration and dispute resolution process. Its stock dropped in early trading.
Chevron proposed to buy Hess for $53 billion in September 2023 thereby taking control of the oilfield, which is understood to have reserves of up to $1 trillion. However, Exxon, which owns 45% of Stabroek claims it holds a contractual right of first refusal over any sale of the Guyana asset.
That is under the terms of a joint operating agreement with Hess and another oil firm, China’s Cnooc, which has a 25% stake in the field.
Stabroek has an estimated 11 billion barrels of oil reserves and has helped boost the ExxonMobil share price in recent times and its valuation which now sits at $477 billion.
Balance of Power
Losing the field would therefore be a huge blow and could swing the balance of fossil fuel power towards Chevron. Investors have been concerned over its long-term pipeline so securing Hess would go a long way to silence the doubters.
It also boosts its global production coverage, which has dropped since 2020.
As reported by the Wall Street Journal, Chevron said it had closed its deal for Hess, and that it plans to nominate John Hess, the smaller company’s longtime chief executive, to its board. The Federal Trade Commission had set aside orders Thursday that had previously barred Hess from serving on Chevron’s board.
“It has been a long process, and it didn’t need to be,” Chevron CEO Mike Wirth said. “It’s unfortunate that Hess’s employees and shareholders were put through such an extended timeline. It should have been resolved quicker. The outcome was never in doubt.”
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