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ExxonMobil and Chevron deepened a rift over a lucrative discovery in Guyana after a long-awaited arbitration process between America’s leading oil companies was delayed until next year.
The two US supermajors have been at loggerheads over Chevron’s bid to acquire a stake in the oil-rich Stabroek Block off the coast of South America through its planned $53bn takeover of Hess.
Exxon, which operates the project, has said it has a right of first refusal over the sale of Hess’s stake, and initiated arbitration proceedings this year that could torpedo the Chevron deal.
Tensions were amplified this week after an arbitration hearing was set for May next year with a ruling to be made in the following three months. Chevron had previously hoped for a decision in the fourth quarter of 2024.
Announcing second-quarter earnings on Friday, Exxon welcomed the later-than-anticipated hearing while Chevron expressed disappointment and said efforts to reach a compromise had failed. Both companies said they remained confident they would prevail.
“We’ve always thought that this matter is too important to rush through and that we were going to need to bring forward all the relevant facts to be taken into consideration — and that would take some time,” Exxon finance chief Kathy Mikells told the Financial Times.
Chevron chief executive Mike Wirth said the company had sought a “sensible” compromise deal that could have acknowledged Exxon’s claim, “but it doesn’t appear that is how this is going to end up”.
“Sometimes good things you have to work for and this will take a little bit more time than we had anticipated, but we remain confident in the outcome,” Wirth told analysts on an earnings call on Friday.
The arbitration timeline means that the Hess transaction, the biggest in Chevron’s history, cannot close until the end of next year, if at all. Chevron has said it will abandon the deal if the process finds in Exxon’s favour.
Exxon on Friday posted earnings of $9.2bn for the second quarter, up from $7.9bn a year ago, driven by record production in Guyana and the Permian Basin of Texas and New Mexico. Analysts had expected a figure of $8.7bn after Exxon warned in July of a hit from weaker refining margins and natural gas prices. Shares slipped 1 per cent by early afternoon in New York.
Chevron — which said on Friday it would relocate its headquarters from California to Texas — reported second quarter net income of $4.4bn, down from $6bn a year ago and below analyst expectations as a result of weaker refining margins. Shares fell 3 per cent.
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Exxon has increasingly sought to focus growth on higher margin oil production in Guyana, where it jointly owns the Stabroek Block alongside Hess and China’s Cnooc, and the Permian, America’s most prolific oilfield.
Exxon became the biggest producer in the Permian after it closed a $60bn deal for Pioneer Natural Resources in May. Overall output rose by 15 per cent or 557,000 barrels of oil equivalent a day during the quarter versus the previous three months.
Exxon this week finalised an exit from the North Sea through the sale of its remaining assets to Viaro Energy, ending a six-decade association with the declining basin.
“We have been divesting more mature assets for a number of years,” Mikells said of the move. “This is just consistent with that overall strategy of strengthening our portfolio and investing in more significant, lower-cost barrel, higher-profit barrel assets like Guyana and the Permian.”
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Publish date : 2024-08-01 23:51:00
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