Exxon Mobil Corp (XOM.N) said on Monday it may preempt Chevron Corp's (CVX.N) acquisition of a 30% stake in a giant Guyana oil block, the centerpiece of its deal for Hess Corp (HES.N).
The companies are in talks on Exxon's claim it has a right to first refusal of any sale of the Stabroek block, a giant field off the coast of Guyana that contains at least 11 billion barrels of oil.
The dispute between the top U.S. oil producers could end Chevron's $53 billion deal for Hess, Chevron warned in a securities filing. If the deal falls part, Hess could be liable for a $1.7 billion breakup fee.
Hess shares fell more than 3% in late trading. Chevron fell almost 1%.
Exxon said in a statement 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," adding it is "working closely with the Guyanese government to ensure their rights and privileges."
"You have to assume that Chevron made a business decision that Exxon wouldn't try to preempt," said Dan Pickering, chief investment officer at Pickering Energy Partners.
The two companies are partners in projects elsewhere and the dispute signals how valuable the Guyana projects are to Exxon, he said.
"It obviously means that 30% of Guyana is really valuable and maybe they think that Chevron is getting in too cheaply, Pickering said, adding "Right now, it feels like a food fight."
Exxon operates all production in Guyana with a 45% stake in the consortium with Hess and China's CNOOC (0883.HK) as its minority partners. In October, Chevron proposed to buy Hess largely to obtain the Guyana stake.
Chevron said it believes the talks "will result in an outcome that will not delay, impede or prevent the consummation of the merger." However, it also said the dispute could wind up in arbitration if the two sides cannot reach a settlement.
"The right of first refusal provision is not applicable to the merger. We are fully committed to the transaction and do not believe the ROFR or these discussions will prevent its successful completion." Chevron and Hess said.
A disruption of the deal terms would be a major blow to the U.S. second largest oil producer, which has been trying to expand production into lower cost fields in the Americas.
Guyana has been trying to attract more large oil producers to dilute Exxon's dominance of the country's energy output. It recently held an offshore block auction that drew bids by TotalEnergies (TTEF.PA), Petronas and Qatar Energy.
The Hess acquisition has been stalled by the U.S. Federal Trade Commission's request for additional information on the merger. That request pushed back any closing to at least the middle of this year, and the Exxon claim could extend it further.
The Exxon-led consortium has said it expects to triple Guyana's oil output to more than 1.2 million barrels of oil per day by 2027.
