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Yahoo
7 hours ago
- Business
- Yahoo
Chevron's $53B deal for Hess clinches access to a 'once-in-several-lifetimes' asset for the oil giant
After nearly two years, Chevron (CVX) looks set to close its $53 billion deal to buy rival Hess (HES) and clinch access to one of the most significant oil discoveries in decades. On Friday, an arbitration panel at the International Chamber of Commerce in Paris ruled that Chevron has the go-ahead to close its all-stock purchase of Hess, shutting out rival major bidder ExxonMobil (XOM) and ending one of the biggest standoffs the oil and gas industry has seen in the last 50 years. After rising early Friday following the news, shares of Chevron were off about 1.5%. The deal, which Chevron and Exxon have been locked in competition over since 2023, is focused on Hess' 30% stake in the generationally rich Stabroek offshore block of oil fields off the northern coast of Guyana. The play is estimated to hold more than 11 billion barrels of oil, according to reporting from Reuters. This is a "once-in-several-lifetimes type of asset," David Sweeney, co-head of the global energy and resources sector at international law firm Clifford Chance, told Yahoo Finance. The project has also played a role in turning Guyana, historically one of the poorest countries in the West, into the second-fastest-growing economy in the world, according to the most recent data available from the International Monetary Fund published in April. 'This merger of two great American companies brings together the best in the industry,' Chevron Chairman and CEO Mike Wirth said in a public statement from the company. 'The combination enhances and extends our growth profile well into the next decade, which we believe will drive greater long-term value to shareholders." When reached for comment, Hess referred to Chevron's public statement. Exxon, which currently operates the block and holds a 45% stake, has been partnered with Hess on exploration activity in Guyana since 2014, when Hess bought out Shell's (SHEL) stake in the project. Exxon is also partnered with the China National Offshore Oil Corporation (CNOOC), which holds a 25% stake. "We disagree with the ICC panel's interpretation but respect the arbitration and dispute resolution process," Exxon wrote in a statement following the ruling. "Given the significant value we've created in the development of the Guyana resource, we believed we had a clear duty to our investors to consider our preemption rights to protect the value we created through our innovation and hard work at a time when no one knew just how successful this venture would become." Shortly after Chevron announced its plan to acquire Hess for $53 billion in October 2023, Exxon moved to block the deal, arguing alongside CNOOC that its partnership agreement with Hess gave Exxon a preemptive right to match Chevron's offer for Hess' 30% stake. That contention had been the central debate among the ICC arbitration panel. "The majors ... are always opportunistic and smart about what they do, so if there is something out there that is worth acquiring, likely they will be willing to acquire it," Sweeney said. Among the majors — the world's biggest fully vertically integrated oil and gas companies, composed of Exxon, Chevron, BP (BP), Shell, TotalEnergies (TTE), and Eni (E) — Exxon and Chevron lead the pack. But this deal has been seen as key to Chevron's success, as the company has lagged behind Exxon in recent years. Chevron's earnings fell from $24.7 billion in 2023 to $18.3 billion in 2024, and in February of this year, the company announced its intent to cull up to 20% of its workforce, or 8,000 employees, by the end of next year. Chevron's stock price has also largely lagged behind Exxon's, growing by roughly 71% over the last five year's compared to Exxon's upward rise of just less than 150%. The S&P 500 has gained about 95% over that same period. "This accretive transaction is expected to drive significant free cash flow and production growth into the 2030s," Chevron CFO Eimear Bonner said in the company's public statement following Friday's news. "The proposed Hess deal would be transformative for Chevron, adding advantaged oil volumes ... and provide geographic diversification," analysts at Bank of America wrote in a note on July 10. The firm also expects the deal to drive free cash flow, which will put Chevron in a stronger negotiating position for a contract extension on its ownership of a major oil play in Kazakhstan. The Chevron-Hess merger is one of the largest M&A transactions in the energy sector in the last couple of years, falling just shy of Exxon's $60 billion acquisition of Permian Basin-concentrated exploration and production company Pioneer Natural Resources, which closed in May 2024. The sector has already seen more than $150 billion in deal value through the first half of 2025, according to a report from PwC. The report noted that the "how we fuel and power" domain, which encompasses the race to generate power for AI infrastructure, is projected to cross $6 trillion in value by 2035. While this deal isn't necessarily predictive of megadeals to come from the majors or in the oil and gas space writ large, Sweeney told Yahoo Finance, a large-scale deal like this is likely to push other companies in the sector to start looking at potential moves. "I would look at it and ask myself, if I was buying and selling assets and running them, 'Alright, is there something I can make out of this plus a number of other different acquisitions that I can cobble together?'" Sweeney said. "The industry is going to be around, and every time there's an acquisition like this — because this is just one of many — it tends to spur opportunities." Jake Conley is a breaking news reporter covering US equities for Yahoo Finance. 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Zawya
11 hours ago
- Business
- Zawya
Chevron wins Exxon case but loses time, oil and billions
Exxon Mobil has lost its arbitration challenge to block Chevron's $55 billion Hess acquisition deal, but the top U.S. oil producer managed to delay the tie-up by over a year, costing its rival billions in lost Guyana oil revenue and slowing integration. Chevron's deal, first announced in October 2023, closed on Friday after a drawn-out dispute over Hess's 30% stake in Guyana's Stabroek block, the most attractive asset in its portfolio. The offshore oilfield holds more than 11 billion barrels of oil and is one of the fastest-growing oil production regions in the world. The No. 2 U.S. oil producer had originally targeted a mid-2024 close for the deal. Exxon, which operates the Guyana project and holds a 45% stake along with Hess and CNOOC, challenged the merger through arbitration, citing a right of first refusal on Hess's Guyana assets. "The delay kept roughly 180,000 barrels per day (bpd) of Hess oil, about $6-7 billion in gross sales and $3 billion in profit, just from Guyana's Stabroek Block sailing past Chevron's till in 2024, because those barrels kept flowing to Hess while the lawyers argued," said Michael Ashley Schulman, chief investment officer at Running Point Capital. Chevron's deal was part of the biggest wave of consolidation in the oil industry for over 20 years and was a strategic counter to Exxon's own blockbuster deal and growing position in the Permian. For Chevron CEO Michael Wirth, acquiring Hess and its stake in Guyana was central to his strategy for the company's future growth. That strategy had been in limbo during the arbitration, turning what was initially expected to be a clean, timely win for Chevron into a high-stakes challenge for Wirth, who had already lost one major deal. He abandoned his takeover bid for Anadarko Petroleum in 2019 after being outmanoeuvred by Occidental Petroleum's higher offer. OVERHANG ON CHEVRON'S STOCK With the Hess deal now closed, Chevron said it expects to realize $1 billion in run-rate cost synergies by the end of 2025 and will cut jobs due to overlapping roles between the two companies. Chevron is in the midst of laying off up to 20% of its global workforce, has faced a rise in safety issues, and its operations in Venezuela have been caught in a geopolitical crossfire. "For Chevron, this favorable ruling helps the major avoid other time-consuming (and likely costly) approaches for inorganic growth," said Atul Raina, vice president at Rystad Energy. "Had the ruling gone in favor of Exxon Mobil and CNOOC, Chevron would then have had to look for growth opportunities elsewhere ... this would have most likely translated into Chevron paying large premiums for buying premier U.S. shale assets that move the needle for the major," Raina added. During the arbitration, Chevron had prepared for the integration of Hess business, purchasing $2.2 billion in Hess shares and issuing $5.5 billion in long-term debt, according to Jefferies analysts. The arbitration itself was also costly, Schulman said. "Add an estimated $50-100 million in arbitration fees and white-shoe billable hours, and you start to see why Mike Wirth's victory lap feels a bit like winning the Indy 500 on three tires," said Schulman. By contrast, Exxon's own $60 billion acquisition of Pioneer Natural Resources, announced the same month as Chevron's deal, closed by May 2024. That deal gave Exxon a bigger position as a shale producer in the top U.S. oilfield, the Permian basin. Since announcing the Hess deal, Chevron shares have declined about 9%. Exxon's stock is up just over 1% since unveiling its Pioneer acquisition, a divergence reflecting investor sentiment around timing and execution. Some of that gap was closed on Friday as Chevron stock fell nearly 1% while Exxon fell nearly 3%. RBC analyst Biraj Borkhataria said the arbitration had clearly been an overhang on Chevron's stock, with many investors choosing to stay on the sidelines during the drawn-out process. "Investor sentiment has shifted multiple times over the last eighteen months, usually based on either Exxon or Chevron commentary at industry conferences, both expressing how 'confident' they were of winning," Borkhataria said in a note.
Yahoo
a day ago
- Business
- Yahoo
Analysis-Chevron wins Exxon case but loses time, oil and billions
By Arunima Kumar (Reuters) -Exxon Mobil has lost its arbitration challenge to block Chevron's $55 billion Hess acquisition deal, but the top U.S. oil producer managed to delay the tie-up by over a year, costing its rival billions in lost Guyana oil revenue and slowing integration. Chevron's deal, first announced in October 2023, closed on Friday after a drawn-out dispute over Hess's 30% stake in Guyana's Stabroek block, the most attractive asset in its portfolio. The offshore oilfield holds more than 11 billion barrels of oil and is one of the fastest-growing oil production regions in the world. The No. 2 U.S. oil producer had originally targeted a mid-2024 close for the deal. Exxon, which operates the Guyana project and holds a 45% stake along with Hess and CNOOC, challenged the merger through arbitration, citing a right of first refusal on Hess's Guyana assets. "The delay kept roughly 180,000 barrels per day (bpd) of Hess oil, about $6-7 billion in gross sales and $3 billion in profit, just from Guyana's Stabroek Block sailing past Chevron's till in 2024, because those barrels kept flowing to Hess while the lawyers argued," said Michael Ashley Schulman, chief investment officer at Running Point Capital. Chevron's deal was part of the biggest wave of consolidation in the oil industry for over 20 years and was a strategic counter to Exxon's own blockbuster deal and growing position in the Permian. For Chevron CEO Michael Wirth, acquiring Hess and its stake in Guyana was central to his strategy for the company's future growth. That strategy had been in limbo during the arbitration, turning what was initially expected to be a clean, timely win for Chevron into a high-stakes challenge for Wirth, who had already lost one major deal. He abandoned his takeover bid for Anadarko Petroleum in 2019 after being outmanoeuvred by Occidental Petroleum's higher offer. OVERHANG ON CHEVRON'S STOCK With the Hess deal now closed, Chevron said it expects to realize $1 billion in run-rate cost synergies by the end of 2025 and will cut jobs due to overlapping roles between the two companies. Chevron is in the midst of laying off up to 20% of its global workforce, has faced a rise in safety issues, and its operations in Venezuela have been caught in a geopolitical crossfire. "For Chevron, this favorable ruling helps the major avoid other time-consuming (and likely costly) approaches for inorganic growth," said Atul Raina, vice president at Rystad Energy. "Had the ruling gone in favor of Exxon Mobil and CNOOC, Chevron would then have had to look for growth opportunities elsewhere ... this would have most likely translated into Chevron paying large premiums for buying premier U.S. shale assets that move the needle for the major," Raina added. During the arbitration, Chevron had prepared for the integration of Hess business, purchasing $2.2 billion in Hess shares and issuing $5.5 billion in long-term debt, according to Jefferies analysts. The arbitration itself was also costly, Schulman said. "Add an estimated $50-100 million in arbitration fees and white-shoe billable hours, and you start to see why Mike Wirth's victory lap feels a bit like winning the Indy 500 on three tires," said Schulman. By contrast, Exxon's own $60 billion acquisition of Pioneer Natural Resources, announced the same month as Chevron's deal, closed by May 2024. That deal gave Exxon a bigger position as a shale producer in the top U.S. oilfield, the Permian basin. Since announcing the Hess deal, Chevron shares have declined about 9%. Exxon's stock is up just over 1% since unveiling its Pioneer acquisition, a divergence reflecting investor sentiment around timing and execution. Some of that gap was closed on Friday as Chevron stock fell nearly 1% while Exxon fell nearly 3%. RBC analyst Biraj Borkhataria said the arbitration had clearly been an overhang on Chevron's stock, with many investors choosing to stay on the sidelines during the drawn-out process. "Investor sentiment has shifted multiple times over the last eighteen months, usually based on either Exxon or Chevron commentary at industry conferences, both expressing how 'confident' they were of winning," Borkhataria said in a note.
Yahoo
3 days ago
- Business
- Yahoo
Chevron's $53 billion Hess acquisition cleared after arbitration ruling
-- Chevron (NYSE:CVX)'s $53 billion acquisition of Hess Corp (NYSE:HES). can now proceed after an arbitration panel ruled in favor of Hess in its dispute with Exxon Mobil Corp (NYSE:XOM). The International Chamber of Commerce oversaw the arbitration, which centered on Exxon's claim that it had a right of first refusal to purchase Hess's stake in the Stabroek block in Guyana, where Exxon also holds a stake. Hess and Chevron successfully argued that the right of first refusal clause did not apply to the sale of Hess's entire company. The decision represents a significant victory for Chevron, ending a period of strategic uncertainty that negatively impacted its stock price and raised questions about the company's due diligence when it agreed to acquire Hess in October 2023. Chevron CEO Mike Wirth had previously stated he would abandon the acquisition if Hess and Chevron lost the arbitration case. The deal was first announced over 20 months ago. Related articles Chevron's $53 billion Hess acquisition cleared after arbitration ruling Victoria's Secret Exposed: The Warning Sign Behind the Stock's 52% Collapse These Under-the-Radar Stocks Offer Better Risk-Reward Ratio Than Nvidia
Yahoo
3 days ago
- Business
- Yahoo
Analysis-Chevron wins Exxon case but loses time, oil and billions
By Arunima Kumar (Reuters) -Exxon Mobil has lost its arbitration challenge to block Chevron's $55 billion Hess acquisition deal, but the top U.S. oil producer managed to delay the tie-up by over a year, costing its rival billions in lost Guyana oil revenue and slowing integration. Chevron's deal, first announced in October 2023, closed on Friday after a drawn-out dispute over Hess's 30% stake in Guyana's Stabroek block, the most attractive asset in its portfolio. The offshore oilfield holds more than 11 billion barrels of oil and is one of the fastest-growing oil production regions in the world. The No. 2 U.S. oil producer had originally targeted a mid-2024 close for the deal. Exxon, which operates the Guyana project and holds a 45% stake along with Hess and CNOOC, challenged the merger through arbitration, citing a right of first refusal on Hess's Guyana assets. "The delay kept roughly 180,000 barrels per day (bpd) of Hess oil, about $6-7 billion in gross sales and $3 billion in profit, just from Guyana's Stabroek Block sailing past Chevron's till in 2024, because those barrels kept flowing to Hess while the lawyers argued," said Michael Ashley Schulman, chief investment officer at Running Point Capital. Chevron's deal was part of the biggest wave of consolidation in the oil industry for over 20 years and was a strategic counter to Exxon's own blockbuster deal and growing position in the Permian. For Chevron CEO Michael Wirth, acquiring Hess and its stake in Guyana was central to his strategy for the company's future growth. That strategy had been in limbo during the arbitration, turning what was initially expected to be a clean, timely win for Chevron into a high-stakes challenge for Wirth, who had already lost one major deal. He abandoned his takeover bid for Anadarko Petroleum in 2019 after being outmanoeuvred by Occidental Petroleum's higher offer. OVERHANG ON CHEVRON'S STOCK With the Hess deal now closed, Chevron said it expects to realize $1 billion in run-rate cost synergies by the end of 2025 and will cut jobs due to overlapping roles between the two companies. Chevron is in the midst of laying off up to 20% of its global workforce, has faced a rise in safety issues, and its operations in Venezuela have been caught in a geopolitical crossfire. "For Chevron, this favorable ruling helps the major avoid other time-consuming (and likely costly) approaches for inorganic growth," said Atul Raina, vice president at Rystad Energy. "Had the ruling gone in favor of Exxon Mobil and CNOOC, Chevron would then have had to look for growth opportunities elsewhere ... this would have most likely translated into Chevron paying large premiums for buying premier U.S. shale assets that move the needle for the major," Raina added. During the arbitration, Chevron had prepared for the integration of Hess business, purchasing $2.2 billion in Hess shares and issuing $5.5 billion in long-term debt, according to Jefferies analysts. The arbitration itself was also costly, Schulman said. "Add an estimated $50-100 million in arbitration fees and white-shoe billable hours, and you start to see why Mike Wirth's victory lap feels a bit like winning the Indy 500 on three tires," said Schulman. By contrast, Exxon's own $60 billion acquisition of Pioneer Natural Resources, announced the same month as Chevron's deal, closed by May 2024. That deal gave Exxon a bigger position as a shale producer in the top U.S. oilfield, the Permian basin. Since announcing the Hess deal, Chevron shares have declined about 9%. Exxon's stock is up just over 1% since unveiling its Pioneer acquisition, a divergence reflecting investor sentiment around timing and execution. Some of that gap was closed on Friday as Chevron stock fell nearly 1% while Exxon fell nearly 3%. RBC analyst Biraj Borkhataria said the arbitration had clearly been an overhang on Chevron's stock, with many investors choosing to stay on the sidelines during the drawn-out process. "Investor sentiment has shifted multiple times over the last eighteen months, usually based on either Exxon or Chevron commentary at industry conferences, both expressing how 'confident' they were of winning," Borkhataria said in a note. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
