Shares in oil giant Exxon Mobil (XOM) were lower today despite one of its top executives declaring that it was the favorite to win a tussle over a $1 trillion oil field.
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Guyana Rights
Exxon senior vice president Neil Chapman told a conference today that a private arbitration hearing held in London between Exxon and rival Chevron (CVX) this week had finished and that a decision is expected in the next two or three months.
Chapman said he was confident that the three-member arbitration panel would rule in Exxon’s favor and determine it had a right of first refusal to purchase U.S. energy firm Hess’ (HES) stake in a Guyana oil joint venture.
Chevron proposed to buy Hess for $53 billion in September 2023, thereby taking control of the oil field known as Stabroek, 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.
Billions of Barrels
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.
Losing the field would therefore be a huge blow and could swing the balance of fossil fuel power toward 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 13% over the last 12 months.
If it rules in favor 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, analysts say, look at another M&A opportunity such as Occidental Petroleum (OXY).
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