Hess shareholders approve $53 billion Chevron deal amid dispute with Exxon over Guyana assets

Hess shareholders on Tuesday approved the New York-headquartered oil company’s pending acquisition by Chevron for $53 billion, even as the timeline for when the deal may close has become increasingly murky with the companies locked in a dispute with Exxon Mobil.

A majority of outstanding Hess shares voted in favor of the merger agreement, though the company did not immediately provide a tally of the vote. Hess’ stock was little changed after the vote.

The pending deal is in potential jeopardy amid Exxon’s claim to a right of first refusal over Hess’ assets in Guyana under a joint operating agreement that governs a massive offshore oil patch called the Stabroek Block.

Hess has a 30% stake in the Stabroek Block, while Exxon leads the development with a 45% stake. China National Offshore Oil Corp. holds the remaining 25%.

Exxon filed for arbitration in March to defend the rights it claims under the joint operating agreement. Chevron and Hess have told investors the pending deal would terminate if Exxon prevails.

Hess said Tuesday that the deal’s completion depends on the resolution of the arbitration proceedings. The companies are working to complete the merger “as soon as practicable,” according to Hess.

Ahead of the vote, Hess shares were trading at around $152, which means the deal spread has widened since when the transaction was announced. That suggests some investors fear the agreement is at risk.

Chevron has repeatedly maintained that the Exxon’s claims under the joint operating agreement do not apply to its acquisition of Hess.

“We are confident our position on the preemption right will be affirmed in arbitration and are working to advance the process on this straightforward matter,” said Chevron spokesperson Bill Turenne in a statement Tuesday. “We look forward to completing the transaction and welcoming Hess to our company.”

But Exxon CEO Darren Woods is confident that his company will prevail in arbitration, telling CNBC in April that the oil major wrote the agreement.

The Chevron-Hess deal was originally slated to close in the first half of 2024, but that timeline has been delayed due to the Exxon factor. Chevron CEO Mike Wirth told analysts on a conference call last month that Hess has asked the arbitration court to issue a ruling in the fourth quarter, which should allow the companies “to close the transaction shortly thereafter.”

Woods told CNBC in April that he expects arbitration to drag into 2025. The CEO has said Exxon does not intend to make a bid for Hess. Exxon is seeking to confirm its rights under the joint operating agreement and find out the value placed on Hess’ Guyana assets under the deal, Woods said.

If Exxon prevails and the Chevron-Hess deal terminates, Hess would remain a stand-alone company and maintain its stake in the Stabroek Block.

The Chevron-Hess pact is also facing scrutiny from the Federal Trade Commission. Turenne said Chevron expects to the FTC review to move toward a conclusion in the coming weeks.

Institutional Shareholder Services had called for Hess shareholders to abstain from the vote on the merger agreement to allow for more details to emerge on how long the arbitration process will take.

ISS said Chevron and Hess did not promptly notify shareholders of the risk posed by the joint operating agreement, waiting months after the deal was announced. Hess shareholders would bear the risk if the deal terminates because Chevron is not obligated to pay a termination fee, according to ISS.

Shareholders would also not be entitled to Chevron’s dividend during the arbitration process, according to ISS. The dividend was touted by Hess as one of the main benefits of the merger, according to ISS.

Glass Lewis, on the other hand, recommended that shareholders vote in favor of the deal. The firm acknowledged that the dispute with Exxon has created uncertainty, but said “the strategic and financial merits of the proposed merger are sound and reasonable, on balance.”