Hess shares fell Tuesday after Chevron warned investors that a dispute with Exxon Mobil and China National Offshore Oil Corp. over Guyana's offshore oil assets could jeopardize its bid to acquire the company.
Hess was down nearly 3% in morning trading Tuesday. Chevron shares fell close to 2%.
Chevron entered an agreement to purchase Hess for $53 billion in an all-stock transaction in October — a play to gain a foothold in Guyana's massive offshore oil assets.
Hess has a 30% stake in a consortium with Exxon and CNOOC to develop Guyana's Stabroek oil block, which is estimated to contain more than 11 billion barrels of oil equivalent.
Exxon has a 45% stake in Stabroek and CNOOC has a 25% stake.
Chevron warned investors in a filing late Monday that Exxon and CNOOC are claiming they have a preemptive right to purchase Hess' stake in Guyana's assets under a joint operating agreement should the transaction close.
Chevron said Exxon and CNOOC's claims could delay or completely derail its acquisition of Hess. Should this occur and the merger fails, Hess would continue to operate as an independent company and retain its stake in Guyana's assets, according to the filing.
Chevron said in the filing that it does not believe the joint operating agreement applies to its acquisition of Hess. The oil major is in discussions with Exxon and CNOOC in an effort to resolve the dispute.
“We owe it to our investors and partners to consider our pre-emption rights in place under our Joint Operating Agreement to ensure we preserve our right to realize the significant value we've created and are entitled to in the Guyana asset,” Exxon said in a statement Monday.
Nitin Kumar, analyst with Mizhuo, told CNBC that Exxon and CNOOC may want compensation to resolve the dispute, but the question is whether Chevron or Hess would be on the hook financially.
If the dispute goes to arbitration and a judge rules that Exxon does indeed have a right to first refusal, this would leave Exxon as the only potential buyer if Hess still wants to sell, Kumar said. Any other company interested in Hess would also face Exxon's right to first refusal, he said.
But the price tag for Exxon to purchase Hess would be steep with Mizuho estimating that the company's stake in Guyana is worth as much as $50 billion, according to Kumar. There is also the question of whether this would raise further scrutiny at the Federal Trade Commission given Exxon's pending deal to acquire Pioneer Natural Resources in the Permian Basin.
Neal Dingmann, an analyst at Truist, told CNBC's “Squawk Box” on Tuesday that he believes it is unlikely that Exxon and CNOOC will scoop up Hess' Guyana assets.
“I think either the transaction will go through or Hess will take that back,” Dingmann said. “I can't imagine that Chevron lawyers would have gone down this road if they there was any issue of these preemptive rights converting over,” he said.
The dispute with Exxon and CNOOC is the latest hurdle that Chevron's bid to acquire Hess faces. The FTC in December requested more information on the deal, in a sign that federal regulators are reviewing the transaction closely over potential competition concerns.
Don't miss these stories from CNBC PRO:
- Berkshire Hathaway is one of the most overbought stocks on Wall Street. Here are the others
- Want an Nvidia alternative? These 6 chip suppliers look set to gain big from the AI boom
- Jefferies says buy this under-the-radar software stock with ties to Nvidia and nearly 20% upside
- 'Opportune time to invest in real estate': Pros name 5 REITs to buy right now