American oil giant Chevron’s (CVX) $53 billion U.S. acquisition of rival Hess Corp. (HES) is in jeopardy, according to multiple media reports.
The takeover has been thrown into turmoil as Exxon Mobil (XOM) has emerged and said that it might scuttle Chevron’s acquisition of a 30% stake in a giant Guyana oil block that is at the centre of the deal to purchase Hess.
Exxon claims that it has a right to first refusal of any sale of the “Stabroek” oil block, a giant field off the coast of Guyana that contains at least 11 billion barrels of crude oil.
A dispute over the Guyana oil field could end Chevron's takeover of Hess. If the deal falls apart, Hess would be liable for a $1.70 billion U.S. break-up fee.
In a written statement, Exxon said that it wants to ensure it will “preserve our right to realize the significant value we’ve created and are entitled to in the Guyana asset.”
Exxon operates all production in Guyana with a 45% stake in a consortium that has Hess and China's CNOOC serving as minority partners.
Last October, Chevron proposed to buy Hess largely to obtain the company’s Guyana stake. Exxon is now challenging that stake owned by Hess.
Exxon has previously said that it wants to triple Guyana's oil output to more than 1.2 million barrels of crude per day by 2027.
In its own statement, Chevron said that it believes ongoing talks “will result in an outcome that will not delay, impede or prevent the consummation of the merger.”
However, the Hess acquisition has already been delayed by the U.S. Federal Trade Commission's (FTC) request for additional information on the deal.
That request from the regulator has pushed back the closing date for the takeover to at least the middle of this year, and Exxon’s claim could extend it even further.
Chevron’s stock is down 1% on news of the Exxon challenge. Its share price has declined 5% over the last 12 months.
The stock of Hess Corp. is down 3% on the latest news related to its acquisition. The company’s share price has gained 8% over the past year.
