Exxon Mobil Corp (XOM.N) on Wednesday said it filed a contract arbitration claim related to Hess Corp's (HES.N) proposed sale of its Guyana oil properties, and suggested it may counter Chevron Corp's pending deal for the assets.
The arbitration case seeks to preserve Exxon's right to evaluate making a bid for Hess's 30% stake in the giant Stabroek offshore oil block if Chevron (CVX.N) proceeds with its proposed $53 billion Hess purchase, Senior Vice President Neil Chapman said in a conference on Wednesday.
Stabroek, which is consider the largest oil discovery in decades, is the prize in Chevron's bid for Hess. Exxon made clear for the first time it could bid for the Hess's Guyana properties.
"I don't know if the Chevron transaction is going to proceed or not, that is in their hands," Chapman said at a Morgan Stanley event in New York. "If there is a transaction, we plan to exert our preemption rights," he said.
Those rights, part of the consortium's operating agreement, he said, "give us the opportunity to look at the value, which we can then match should we choose to do so."
Exxon declined to comment whether it would bid for Hess assets if Chevron's deal does not proceed for any reason.
Chevron and Hess have said they believe the rights do not apply as the transaction would involve a merger with the parent company that would keep Hess's Guyana subsidiary intact.
“We remain fully committed to the transaction, and are confident in our position. We look forward to closing the transaction on the terms we’ve agreed,” Chevron spokesperson Braden Reddall said in a statement.
Chevron's bid for Hess is "an attempt to circumvent" the joint operating agreement that governs the partners' roles in the Stabroek block, Chapman said.
Its arbitration filing "could be a negotiating stance," said Mark Kelly, CEO of financial firm MKP Advisors.
Wednesday's drop in Hess stock "suggests that the market is somewhat happy to take them at their word," Kelly said, and that Exxon could have a right to own Hess Guyana assets if Chevron wants to buy it.
Hess shares dropped more than 2% on Wednesday, Chevron shares fell less than 1% and Exxon shares rose 1%.
Exxon now holds a 45% stake in the consortium and operates all of its production. If it bought Hess's share, it would hold 75% of the block.
A contract arbitration case typically takes six months or more, Chapman said.
The company has been negotiating with Chevron and Hess over its right of first refusal to any sale of Hess's Stabroek stake. It formally filed for arbitration on Wednesday with the International Chamber of Commerce, he said.
"We, as participant (in the block), have the rights to match a reasonable allocation of the value of the Hess transaction," Chapman said.
Asked if talks with Chevron would continue and if there were chances of a negotiated agreement before the arbitration process ends, Chapman said that "disputes take place all the time, and they get resolved."
"The only real difference is this is in the public domain," he said.
The largest U.S. oil company is awaiting regulatory approval for its $60 billion proposed purchase of Pioneer Natural Resources. That deal would make Exxon the largest oil producer in the top U.S. oil field.
