ExxonMobil is confident of prevailing in an international arbitration case over a share of Guyana's vast offshore oil riches that has pitted the top US major against smaller rival Chevron.
"We are confident the judges will go in our favour," senior vice-president Neil Chapman said as the private hearing wrapped up in London last week. The three-person arbitration panel at the International Chamber of Commerce is expected to give its ruling within two to three months in relation to the contractual dispute that has held up Chevron's pending $53bn acquisition of US independent Hess. Speaking at the Bernstein 41st Annual Strategic Decisions Conference in New York last week, Chapman said such contractual disputes are not uncommon in the oil industry, but they are normally resolved in private.
ExxonMobil is the operator with a 45pc stake in the Stabroek block off the coast of Guyana, where an estimated 11bn bl of oil equivalent have been discovered over the past decade. Both it and Chinese state-controlled CNOOC, which has a 25pc holding, have asserted a right of first refusal over the 30pc interest owned by Hess.
That stake is the key attraction in Chevron's planned takeover of Hess, which will address concerns over the company's long-term growth prospects and help narrow a gap with ExxonMobil. The case is also being closely watched by oil and gas lawyers and could have a bearing on how future contracts are drawn up. Hess and Chevron have argued that a right of first refusal does not apply in the event of a corporate takeover. The arbitration has delayed the takeover, which has already won approval from US anti-trust regulator the Federal Trade Commission as well as Hess shareholders.
ExxonMobil's Chapman played down concerns about whether relations with the other parties would suffer as a result of the long-running squabble. Hess has been a "very good partner" in Guyana and "in terms of operations, in terms of investments, we're 100pc aligned", he said.
Fight for your right
ExxonMobil argues that little would change if Hess ended up winning the arbitration case and Chevron went on to complete its acquisition. "We believe strongly you have to protect your contractual right, the Chinese believe the same thing and that's why we went to arbitration," Chapman said. "If the judges decide that's not the case, then we get a new partner," he added.
Under such a scenario, it would be business as usual. "We have partnerships with Chevron all over the world. It's been no change in terms of how we're working together at all," Chapman said. Chevron has previously warned that the Hess acquisition could be derailed if the arbitration case sides with ExxonMobil.But such is Chevron's optimism that it will close the deal that the company snapped up almost 5pc of Hess shares at a discount on the open market in the first quarter. The move reflects Chevron's conviction in "our confidence in the successful arbitration outcome", chief financial officer Eimear Bonner said in March.
Chevron's chief executive Mike Wirth has similarly expressed confidence in Hess' position on a number of occasions. "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," he said earlier in the year. Hess' core argument is that such pre-emption rights do not apply because of the structure of the merger and language in the relevant clause. "Chevron and Hess believe that ExxonMobil's and CNOOC's asserted claims are without merit," Hess said in a filing in April, adding that it plans to "vigorously defend" its position before the tribunal.
