With final say on arbitration due by August-end, Chevron readying for ‘prompt close’ of Hess merger in 2025

U.S.-headquartered energy giant Chevron is confident that its rival, Hess Corporation, will emerge as the winner in the ongoing arbitration proceedings the remaining Stabroek block partners launched over the sale of interests in assets off the coast of Guyana. Therefore, the company has laid the groundwork to bring Hess’ upstream portfolio into its fold once the arbitration ends, which is expected to occur within three months after the hearing in May 2025.

Following the first offshore discovery in 2015, Guyana has emerged as the world’s fastest-growing oil region, thanks to the prolific Stabroek block, which covers 6.6 million acres or 26,800 square kilometers. This block is operated by ExxonMobil with a 45% interest, while other partners, Hess Guyana Exploration and CNOOC Petroleum Guyana, hold the remaining 30% and 25% stakes, respectively.

Chevron revealed a $53 billion all-stock deal to acquire Hess Corporation in October 2023, which was anticipated to close in the first half of 2024, subject to Hess shareholder approval, regulatory approvals, and other customary closing conditions. Hess shareholders were set to receive 1.0250 shares of Chevron for each Hess share. The total enterprise value of the transaction, including debt, is $60 billion.

However, things did not go according to plan, as ExxonMobil and CNOOC, Hess’ partners in the Stabroek block, decided to file cases before the International Chamber of Commerce in March 2024. The duo is convinced they have a right to a first refusal over any sale of the U.S. player’s 30% interest in the oil-rich offshore block in Guyana under the existing joint operating agreement.

The arbitration proceedings have delayed the merger, as they take months to be sorted out, dragging the business combination closure date into 2025. Despite the obstacles, Hess and Chevron have made inroads in progressing the merger by securing Hess stockholder approval and clearing the Federal Trade Commission (FTC) antitrust review.

However, the completion of the merger remains subject to closing conditions, including the satisfactory resolution of ongoing arbitration over preemptive rights in the Stabroek block joint operating agreement, which both Chevron and Hess claim do not apply.

Mike Wirth, Chevron’s Chairman and CEO, commented: “Really pleased last year with progress on two important milestones: shareholder vote and FTC approval. The remaining issue is the resolution of this arbitration matter with the two other partners on the Stabroek block in Guyana. That is scheduled for an arbitration hearing in May of this year. The arbitration panel of 3 arbitrators has indicated 90 days following that hearing, they would expect to be able to render a decision.

“We look forward to having that issue resolved here in 2025. We continue to be very confident in Hess’ position in the arbitration. This has been studied extensively, and we feel like they clearly have the right side of this argument, and we look forward to closing the deal. We’ve had the time to do a lot of integration planning and we’re well prepared for that and for a prompt close and look forward to doing that this year.”

Potential delays in consummating the Hess transaction still exist, including those related to the ongoing arbitration proceedings regarding preemptive rights in the Stabroek Block joint operating agreement. This also entails the risk that such ongoing arbitration may not be resolved to Chevron’s satisfaction, bringing with it the potential for the transaction to fall through.

Highlighting the potential for the Stabroek block to enrich its hydrocarbon portfolio, Wirth recently pointed out: “There’s an old adage in our industry that big fields get bigger over time, and this is a really big oil field and certainly, its history to date has been one of additional exploration success in the regions that have been explored. There are other regions within the block that are slated for further exploration.

“The story has gotten better and better over time. Right now, the production is oil, and the gas is being reinjected. There’s a fair amount of gas in these fields as well. Over time, I think you’ll see this gas produced as well. The partners are developing plans to bring that into Guyana to support their economy. Everything continues to trend in a very positive direction, and we’re very excited to join this project.”

While awaiting the outcome of arbitration, Chevron is keeping busy by bringing on stream and progressing other projects in its global portfolio, including the one operated by Cabinda Gulf Oil Company (CABGOC), the firm’s subsidiary in Angola. At the end of December 2024, the firm and its Block 0 partners achieved the first gas from the Sanha Lean Gas Connection (SLGC) project.

Billy Lacobie, Managing Director of Chevron’s Southern Africa Strategic Business Unit, said at the time: “First gas from the Sanha Lean Gas Connection shows CABGOC’s success in maximizing value from existing resources in Block 0 while growing capabilities in Angola.

“The Sanha Lean Gas Connection project will help supply gas from Block 0’s Sanha field to Soyo power plants and Angola Liquefied Natural Gas (ALNG), serving as a gas hub for CABGOC operations.”

While CABGOC operations export 300 million standard cubic feet (mmscf) per day to ALNG through the Congo River Crossing Pipeline (CRX), the first stage of SLGC will deliver an additional 80 mmscf per day of Sanha gas to the Angola LNG gas plant.

The next stage encapsulates commissioning the booster compression (BC) module, which will add 220 mmscf per day, bringing the CRX pipeline to its full capacity of 600 mmscf per day. CABGOC operates and holds a 39.2% interest in Block 0, a concession adjacent to the Cabinda coastline, and a 31% operated interest in a production-sharing contract in deepwater Block 14, located west of Block 0.

With 36.4%, CABGOC is also the largest equity shareholder in the Angola LNG project in Soyo, and a shareholder with 31% interest in the New Gas Consortium, operated by Azule Energy. Chevron claims to be working to make sure there is a reliable supply of energy to meet global demand, which is constantly rising due to factors like population growth and technological advancements.

Therefore, the U.S. energy giant expects to reach 1 million barrels of oil equivalent production per day from the Permian basin in 2025 and bring online additional projects in the U.S. Gulf of Mexico. The firm achieved its first oil at the Future Growth Project (FGP) at the Tengiz oil field in Kazakhstan on January 23, 2025.

Mark Nelson, Chevron’s Vice Chairman, noted: “First oil at the Future Growth Project is the latest in a series of development milestones, including in the Gulf of Mexico and the Permian, that are expected to significantly increase free cash flow to the company and deliver value for Chevron shareholders.”