News
Proxy consultant Glass Lewis urges Hess shareholders to accept Chevron offer
By Gary McWilliams
HOUSTON (Reuters) – Hess shareholders were expected to vote in favor of Chevron’s $53 billion all-stock offering at the oil company’s special meeting on May 28, proxy consultant Glass Lewis said on Thursday.
The terms of the proposed deal provide a reasonable valuation and offer potential upside for Hess shareholders, while the strategic and financial merits of the proposed merger “are sound and reasonable, overall,” Glass Lewis said.
The second-largest US oil producer, Chevron, last October offered to acquire rival Hess in a bid to gain a foothold in Guyana’s lucrative oil-rich offshore fields, where Hess holds a 30% stake. in a joint venture.
Hess’ partners in Guyana, Exxon Mobil and China’s CNOOC, filed arbitration proceedings in March claiming the right of first refusal over Hess’ assets in Guyana. The arbitration halted the sale and surprised Chevron.
While the outcome of the arbitration is unclear, there is no guarantee that Exxon and CNOOC will exercise preemptive rights over Hess’ interest in Guyana’s giant Stabroek offshore field if they win the case, Glass Lewis said.
Exxon said it would evaluate its options depending on the arbitration panel’s decision, but would not rule out acquiring Hess’ stake in the block.
Chevron could back out of the purchase agreement without paying any compensation to Hess shareholders if Exxon and CNOOC win the arbitration case, Glass Lewis said.
GIANT OIL FIELD
The Exxon, Hess and CNOOC joint venture has discovered more than 11 billion barrels of recoverable oil at Stabroek since 2015. The group has said it could install up to 10 production ships this decade to expand production.
The Stabroek consortium is pumping around 650,000 barrels per day (bpd) and aims to reach 1.2 million bpd by 2027.
The group led by Exxon oversees all oil production in the country. But Guyana is in talks with a consortium of Petronas, TotalEnergies and QatarEnergy about drilling in a separate block.
Exxon operates the Stabroek block and has a 45% stake, while Hess holds a 30% stake and CNOOC 25%.
A decision on arbitration between the companies may not be made this year, Exxon said. Chevron’s bid also awaits regulatory approval from the U.S. Federal Trade Commission.
Proxy consulting firms split recommendations. Leading U.S. adviser Institutional Shareholder Services on Monday urged shareholders to refrain from voting on the deal and to allow more time for details about the arbitration process with Exxon to emerge.
Pensions & Investment Research Consultants, a London-based consultancy firm, issued an opinion in favor of the combination.
(Reporting by Gary McWilliams and Sabrina Valle in Houston; Editing by Jamie Freed)