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Guyana’s president said he would welcome Chevron joining the ExxonMobil-led consortium that runs a $150 billion-plus oil project there, ahead of a crisis vote by Hess shareholders on Chevron’s controversial takeover bid.
In October, Chevron offered $53 billion to buy Hess, in part to gain a foothold in Guyana’s Stabroek block, one of the most lucrative oil fields in decades. Hess owns 30 percent of the project.
Irfaan Ali told the Financial Times that his government wants to attract the world’s biggest oil companies, such as Chevron, to develop its resources, and suggested that any move by Exxon to increase its stake in the project could raise competition concerns.
The Chevron-Hess deal erupted into a clash between America’s two biggest oil companies after Exxon filed an arbitration claim claiming it had a right of first refusal to buy Hess’ stake in the Guyana project – a move that could increase its own holdings beyond the current 45 percent share.
“I wouldn’t use the word nervous,” Ali said when asked if he was concerned about the possibility of Exxon acquiring a more dominant stake in the project. He noted that consolidation in other sectors, which has resulted in one business controlling more than half the market, “may raise concerns” and said: “We believe the partnership is working well.”
Ali said the proposal to bring a new major partner into the consortium was a matter for the existing partners, but added that he believed it would be good to have “the largest operators from the US operating in Guyana”.
Exxon has indicated it has no intention of making a counteroffer for Hess. However, CEO Darren Woods said acquiring the smaller company’s entire 30 percent stake in the Guyana business would be “an option” if its pre-emptive claims are proven.
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The Guyanese president’s comments come ahead of a pivotal vote by Hess shareholders on Tuesday on whether to accept Chevron’s offer. The vote is expected to be close as a growing number of investors express concerns about the deal.
Institutional Shareholder Services, a leading proxy adviser, told investors to abstain and called for the merger to be put on hold until more details about the arbitration process emerge. Glass Lewis, another prominent deputy adviser, urged a yes vote.
Three shareholders — HBK Capital Management, DE Shaw and Pentwater Capital Management — said they would abstain. Together, the funds hold about 6 percent of Hess’s stock. The company’s biggest shareholders — Vanguard, BlackRock and State Street — declined to say how they would vote.
“The vote is going to be close,” said Frederic Boucher, risk arbitrage analyst at Susquehanna Financial Group.
“If it’s close to but not quite over the 50 percent mark.” Perhaps Hess will cut the May 28 vote and introduce a [compensation payment] or something like that to get you across the finish line.”
Ali has been criticized in Guyana for failing to renegotiate the Stabroek Production Sharing Agreement signed by the previous government with Exxon, Hess and China’s Cnooc. Oil contract experts called it an “unusually sweet deal.”
Ali said the contract was “skewed in favor of Exxon” but the government decided not to seek renegotiation because the “sanctity of the contract” was important. Getting embroiled in a legal battle with a “huge company” like Exxon would be detrimental to the entire oil sector, he added.