A high-stakes corporate clash is unfolding between Chevron CVX and ExxonMobil XOM — two of the world’s largest oil companies. At the heart of the dispute is Guyana’s offshore Stabroek Block, a massive oil field with over 11 billion barrels of recoverable reserves. Chevron’s planned $53 billion acquisition of Hess Corporation HES, which owns a 30% stake in the block, is now facing fierce resistance from ExxonMobil, the project’s operator and 45% stakeholder. ExxonMobil, along with its Chinese partner CNOOC (25% stake), claims it has a contractual right of first refusal (ROFR) that would allow it to either block or match Chevron’s bid.
Chevron and Hess argue that the clause doesn’t apply in this case. They maintain the ROFR is triggered only in direct asset sales, not in full corporate mergers like theirs. ExxonMobil, meanwhile, contends that because Hess’s value is overwhelmingly tied to its Guyana interest — reportedly around 70% — the distinction between an asset and entity sale is largely irrelevant. With both sides unwilling to back down, the issue has landed in arbitration under the International Chamber of Commerce. The confidential hearing is set to begin today, with a final ruling expected by the end of the third quarter.
Why Chevron Needs Hess
For Chevron, the stakes are enormous. Its oil and gas reserves fell to 9.8 billion barrels at the end of 2024, the lowest level in over a decade. Adding Hess’s Guyana stake is seen as vital to reversing that trend and improving its reserve replacement ratio. A win in arbitration would give Chevron access to one of the few remaining high-growth, low-cost basins, helping to secure its long-term production outlook. A loss, however, would leave it scrambling for another transformative acquisition at a time when large-scale opportunities are limited.
The transaction has already been approved by Chevron’s shareholders and cleared by U.S. regulators, but its fate now rests on the tribunal’s interpretation of a joint operating agreement drafted more than a decade ago. In anticipation of a positive outcome, Chevron has bought roughly 5% of Hess’s outstanding shares in the open market. Traders and hedge funds are also heavily invested, with more than $10 billion worth of Hess stock purchased by merger-arbitrage funds betting on a favorable ruling.
Exxon’s Stand and Broader Implications
ExxonMobil views Hess’ exit to Chevron as a disruption of a long-standing partnership and a threat to its control of the Guyana project. Exxon CEO Darren Woods has defended the Zacks Rank #3 (Hold) company’s position, arguing that it took early development risks when few others would and that its rights under the operating agreement must be upheld. Behind the legal battle lies a strategic concern. Letting Chevron in could weaken Exxon’s influence in what is quickly becoming the most important oil basin in the Western Hemisphere.
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The dispute has cooled what was once a cordial relationship between Woods and Chevron CEO Mike Wirth. Legal observers believe the case may come down to how a few key terms are interpreted in the joint operating agreement. The ruling, expected by Q3, could set a precedent for how future pre-emption rights are applied in corporate acquisitions, especially in high-value energy ventures.
No matter how the arbitration ends, the case will have a lasting effect. Whether Chevron gains a critical growth engine or Exxon consolidates control, the outcome will shape strategic decisions across the Oil/Energy sector for years to come.
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Chevron Corporation (CVX): Free Stock Analysis Report Exxon Mobil Corporation (XOM): Free Stock Analysis Report Hess Corporation (HES): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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