A large oil industry deal advanced on Tuesday after shareholders of Hess approved a proposed sale of the company to Chevron for $53 billion.
Control over one of the most prized oil assets, off the shores of Guyana, is at stake in the deal, which still faces significant hurdles.
Hess is a junior partner in a lucrative Exxon Mobil-led drilling project in the South American country. Exxon is contesting Chevron’s acquisition of Hess by arguing that Hess can’t sell itself without allowing Exxon to buy its stake in the Guyana project. Chevron and Hess have said Exxon’s interpretation of the terms of Exxon and Hess’s partnership is incorrect.
Exxon has asked an arbitration organization to resolve the dispute.
Some of Hess’s largest investors, hoping to pressure Chevron into sweetening its offer, had withheld their support for the deal, which was announced in October. But Hess prevailed at its shareholders’ meeting on Tuesday in convincing a majority that the deal was in their best interest. The company said it would release a tally of the vote later.
Before the deal can close, Chevron would have to prevail in the arbitration case. Exxon’s chief executive, Darren Woods, told CNBC this month that the arbitration panel working on the case might not issue a decision until next year.
The chief executive of Hess, John Hess, whose father started the company in 1933, had lobbied investors to vote for the deal in recent weeks. In at least one of those conversations, Mr. Hess said Chevron was not prepared to raise its offer, according to a person familiar with the matter.
In addition to Guyana, Hess’s portfolio includes oil and gas operations in North Dakota, the Gulf of Mexico and Southeast Asia.
Institutional Shareholder Services, a firm that advises investors on shareholder votes, urged Hess’s investors to withhold their support for the deal. Hess “shareholders bear the risk of a potentially broken deal without any compensation,” ISS wrote in a recent report.
Glass Lewis, another shareholder advisory firm, recommended that Hess’s investors sign off on the sale to Chevron, citing the strength of the larger oil company’s balance sheet, among other factors.
Deal-making among oil and gas producers surged last year to its highest level in more than a decade, as measured by deal value, according to the U.S. Energy Information Administration. Exxon’s $60 billion purchase of the shale driller Pioneer Natural Resources, announced just before Chevron’s deal with Hess, closed this month.
Investors have approved all proposed U.S. oil and gas mergers that have been put to a vote since at least 2020, according to a Diligent Market Intelligence review of publicly disclosed results.
