Exxon Considers Pre-Emption Rights to Hess’ Guyana Oil Stake

(Bloomberg) — Exxon Mobil Corp. and Cnooc Ltd. are considering exercising rights to acquire Hess Corp.’s stake in a giant offshore oil development in Guyana, potentially obstructing Chevron Corp.’s $53 billion deal to buy into the field.

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Exxon and Beijing-based Cnooc already own stakes in Guyana’s Stabroek block and have the right of first refusal over any change of ownership. Chevron warned that if the companies choose to exercise those rights, its deal to buy Hess may collapse. Hess shares slid 2.6% to $146 at 5:29 p.m. in late New York trading.

“We owe it to our investors and partners to consider our pre-emption rights in place under our Joint Operating Agreement to ensure we preserve our right to realize the significant value we’ve created and are entitled to in the Guyana asset,” Exxon said in a statement Monday.

Exxon, the operator of the project, first found oil in Guyanese waters in 2015 and has since discovered 11 billion barrels of reserves. The company expects production there to double to 1.2 million barrels a day by 2027, making it the world’s fastest-growing major oil discovery in the past decade. The project’s success made Hess’s 30% stake in the field its key asset, which lured Chevron to strike a deal to buy the entire company in October.

Read More: Guyana Is Trying to Keep Its Oil Blessing From Becoming a Curse

But Chevron warned in a regulatory filing Monday that the deal may fail to be completed if Exxon and Cnooc launch a successful counterbid.

“If these discussions do not result in an acceptable resolution, and arbitration (if pursued) does not result in a confirmation that such right of first refusal provision is inapplicable to the merger, then there would be a failure of a closing condition under the Merger Agreement, in which case the merger would not close,” Chevron said.

(Updates with Chevron filing starting in second paragraph.)

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