Exxon Mobil and Chevron Get Ready to do Battle Over $1T Guyana Oilfields

Exxon Mobil (XOM) and Chevron (CVX) stock will be closely watched by investors this week as the two oil giants get set for a battle over lucrative oil discoveries in South America.

At a private arbitration hearing in London the two companies will square off over the right to buy a 30% stake in Guyana’s Stabroek oilfield, owned by U.S. energy firm Hess (HES).

Four Way Tussle

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 $444 billion.

In the Balance

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. The Chevron share price is down 16% over the last 6 months.

Both companies are confident they will prevail in the hearing this week. The ruling is expected to be made by August or September this year.

If it is in favour of Exxon then Chevron could walk away from the deal but there is also the option to renegotiate the terms to benefit both parties.

Chevron could also, say analysts, look at another M&A opportunity such as Occidental Petroleum (OXY).

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