Hess shareholders approve $53 billion merger with Chevron, eyeing major Guyana oil assets

Hess shareholders approved on Tuesday the proposed US $53 billion merger with Chevron, setting the stage for the second-largest U.S. oil company to acquire a key asset and establish a presence in Exxon Mobil's substantial Guyana discoveries.

According to the statement, most votes were in favour of the deal, with no approval needed from Chevron stockholders for the merger to proceed.

“We are very pleased that the majority of our stockholders recognize the compelling value of this strategic transaction and look forward to the successful completion of our merger with Chevron,” John Hess, CEO of Hess said. “Together we will be positioned as a premier integrated energy company, with the leadership, asset portfolio and financial resources to deliver significant shareholder value for years to come.”

While this approval removes one obstacle, the merger still requires regulatory consent and faces a significant legal challenge from Exxon and CNOOC, Hess' partners in Guyana, which could delay the deal until 2025, according to Reuters.

The arbitration

Last October, Chevron proposed acquiring Hess to secure a stake in Guyana's profitable offshore fields. The deal is currently under regulatory review and contested by Exxon, which claims it has a right of first refusal on Hess's Guyana assets.

Chevron and Hess maintain confidence that Exxon's claim does not apply, expecting arbitration to conclude within five to six months. However, Exxon suggests arbitration could extend to next year, according to Proxy firm Institutional Shareholder Services.

The shareholder approval is significant for both companies. Acquiring Hess's profitable oilfields in Guyana would help Chevron mitigate geopolitical risks associated with the TengizChevroil project in Kazakhstan, which mainly transports oil through Russia to the Black Sea.

Additionally, this acquisition could offset cost overruns in Chevron's Australian liquefied natural gas (LNG) projects, which have faced labour and operational challenges.

Hess shareholders will own nearly 15% of the larger Chevron and benefit from its dividend, which is four times greater than Hess's. The shareholder approval also strengthens the companies' position in negotiations with Exxon. While Exxon has shown no interest in acquiring Hess entirely, it has not ruled out a bid for Hess's Guyana assets, Reuters reported.

Exxon operates all production in Guyana with a 45% stake in the giant Stabroek Block. CNOOC owns 25% of the joint venture, both claiming a right of first refusal on any sale of Hess's 30% stake.

The ISS had recommended shareholders abstain from voting and urged Hess to offer an incentive due to the deal delay. Over the past month, John Hess personally visited or called more than 30 firms to secure support for the merger, according to sources familiar with the matter.