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Proxy Adviser Glass Lewis Urges Hess Shareholders to Accept Chevron Offer

5/18/2024

(Reuters) — Hess shareholders should vote in favor of Chevron’s $53 billion all-stock offer at the oil company’s May 28 special meeting, proxy adviser Glass Lewis said on Thursday.

The proposed deal terms provide a reasonable valuation and offer the potential for upside to Hess shareholders, while the strategic and financial merits of the proposed merger “are sound and reasonable, on balance,” Glass Lewis said.

No. 2 U.S. oil producer Chevron last October offered to acquire rival Hess in a move to gain a foothold in oil-rich Guyana’s lucrative offshore fields, where Hess holds a 30% stake in a joint venture.

Hess’ partners in Guyana, ExxonMobil and China’s CNOOC, in March filed an arbitration case claiming a right of first refusal over Hess’s Guyana assets. The arbitration has stalled the sale and surprised Chevron.

While the outcome of the arbitration is unclear, there is no guarantee Exxon and CNOOC would exercise preemption rights to Hess’s stake in Guyana’s giant Stabroek offshore field if they win their case, Glass Lewis said.

Exxon has said it would evaluate its options depending on the arbitration panel’s decision but would not rule out acquiring Hess’s stake in the block.

Chevron could walk away from the purchase agreement without paying any compensation to Hess shareholders if Exxon and CNOOC win their 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 vessels this decade to expand production.

The Stabroek consortium is pumping about 650,000 barrels per day (bpd) and aims to reach 1.2 million bpd by 2027.

The Exxon-led group oversees all oil production in the country. But Guyana is in talks with a Petronas, TotalEnergies and QatarEnergy consortium over drilling in a separate block.

Exxon operates the Stabroek block and owns a 45% share, while Hess holds a 30% stake and CNOOC 25%.

A decision on arbitration between the companies might not be reached this year, Exxon has said. Chevron’s bid also is pending regulatory approval by the U.S. Federal Trade Commission.

Proxy advisory firms have split recommendations. Top U.S. adviser Institutional Shareholder Services on Monday urged shareholders to abstain from voting on the deal and to allow more time for details on the arbitration process with Exxon to emerge.

Pensions & Investment Research Consultants, a London-based advisory firm, issued an opinion in favor of the combination.

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