HOUSTON (Reuters) -Exxon Mobil CEO Darren Woods yesterday said his company is trying to establish it has rights over Hess Corp (NYSE:HES)’s Guyana assets in its dispute with Chevron (NYSE:CVX), not buy the company itself.
In his first public remarks on the company’s pursuit of an arbitration case that could block Chevron’s $53 billion deal for Hess, Woods said Exxon (NYSE:XOM) would not have waited for Chevron to announce its Hess deal if it had wanted to buy Hess.
“We’re basically standing up for what we believe is a fundamental right,” Woods told Reuters at the CERAWeek energy conference in Houston. Exxon is trying to “secure and confirm the rights in that contract gives the existing partners.”
Chevron and Hess have said they disagree with Exxon’s interpretation of the joint operating agreement that governs the consortium responsible for all of Guyana’s oil production and which Exxon claims includes a right of first refusal.
The document has not been made public. Hess has said the deal may not be able to close by its prior estimate of mid-2024.
Exxon does not rule out acquiring Hess’ entire 30% share in the giant Stabroek block offshore of Guyana, which would take its stake to 75%. Exxon currently holds a 45% stake with Hess and China’s CNOOC (NYSE:CEO) Ltd as minority partners.
Stabroek is the prize in Chevron’s bid for Hess. It is the site of the largest oil discoveries in almost two decades and is expected to produce more than 1.2 million barrels of oil and gas per day by 2027.
A potential acquisition of Hess’ assets in Guyana would be the last decision in a three-stage process, Woods said.
Exxon first wants to establish that it holds preferential rights over Hess Guyana’s asset, Woods said. Then it aims to determine the Hess asset’s value with partners before considering if it makes sense for Exxon to shoulder the investment required for holding a larger share of the block, the CEO said.
“We’ve got to get past the first hurdle, which is an alignment, an agreement that a preemption right exists in the contract,” Woods said. He left open the possibility of an offer for some or all of the stake.
“I don’t feel locked into a 75% number,” the sum of Exxon and Hess’s current stakes, Woods said. “That is one of the options. And one of the considerations with that option would be the capital requirements that we comfortable with.”
A Chevron spokesman did not reply to request for comment on Woods’ remarks.
TIMING
Exxon understands Hess’ desire to resolve the matter and will “be very cooperative and try to facilitate a fast resolution” of the preemption of rights dispute, Woods said.
He said he does not have “a good view” on timing for final resolution on the destiny of Hess’ assets. The arbitration case could last five to six months, another executive had said.
Determining how Chevron’s proposed acquisition of Hess will translate into a value for Hess asset in Guyana will be the second stage of debate and one that will not be “a straightforward black and white process,” Woods said.
“There will be, you know, a lot of discussion that happens between the parties,” the CEO said.
Woods declined to comment on whether he would meet this week with Chevron CEO Michael Wirth or Hess CEO John Hess.
Chevron and Hess were first to disclose in filings that Exxon intended to bring the dispute to arbitration.
“One of the challenges of this particular deal is it went public,” Woods said. “A lot of those discussions (about contract terms) needed to happen and hadn’t been happening”.
Exxon does business with Chevron all around the world and will continue to have long partnerships with Chevron, Woods said.
“This is a business issue,” Woods said. “We are going to be a constructive force as we work to get to the right answer.”