Exxon Mobil indicated Wednesday it could make a bid for Hess’ oil assets in Guyana if the company’s merger agreement with Chevron fails due to a dispute over pre-emption rights.
Exxon filed for arbitration at the International Chamber of Commerce in Paris Wednesday morning to adjudicate the dispute with Chevron over Hess’ Guyana assets, Exxon senior vice president Neil Chapman said during an interview at a Morgan Stanley event.
Exxon claims it has a pre-emptive of right to make an offer for Hess’ assets in Guyana under a joint operating agreement that governs an area called the Stabroek block, which is estimated to have 11 billion barrels of oil and gas. Hess has a 30% stake in the Stabroek block.
“We are extremely confident in our position that pre-emption rights exist in this contract, and we fully intend on ensuring that we preserve those pre-emption rights,” Chapman said.
Chevron entered an agreement in October to purchase Hess for $53 billion, in a play to gain a foothold in Guyana’s massive offshore oil assets. The oil major has said Exxon’s pre-emption rights under the joint operating agreement do not apply to its pending merger with Hess.
Chevron has warned investors, however, that its deal with Hess would terminate if an arbitration court rules in its Exxon’s favor.
“We believe there is opportunity value here, there is option value here,” Chapman said. “If that transaction does not proceed, there is potential value down the road for Exxon Mobil — that option value is really, really important.”
“It would be incomprehensible for us to say ‘well we’re not going to look at that value, we’re just going to let the transaction proceed,'” Chapman said. “You have a responsibility to shareholders.”