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Chevron, Hess Tumble as $53 Billion Deal Faces Long Delay

The Chevron Corp. logo in front of One The Esplanade office tower, which houses the company's office, in Perth, Australia, on Thursday, Sept. 14, 2023. Liquefied natural gas workers at key Chevron sites in Western Australia have begun ramping up a campaign of industrial action in a dispute that has roiled global energy markets. Photographer: Philip Gostelow/Bloomberg (Philip Gostelow/Bloomberg)

(Bloomberg) -- Shares of Chevron Corp. and Hess Corp. plunged after announcing an arbitration hearing with Exxon Mobil Corp. related to their $53 billion merger will be delayed until at least mid-2025.

The international arbitration panel handling Exxon’s right-of-first-refusal claim over Hess’ stake in its Guyana oil project has scheduled the hearing for May 2025, with a decision expected in the following three months, the companies said late Wednesday. They had previously issued guidance for a decision in the fourth quarter of 2024.

Hess plunged as much as 8.2% in New York trading, the biggest intraday loss since March 2023. Chevron dropped as much as 5.3%. The companies were the worst performers in the S&P 500 Energy Index. 

The spread between Hess trading price and the value of Chevron’s all-stock offer reached nearly $15, the widest since the deal was announced, a sign that the market is increasingly concerned about the deal outcome.

“Hess and Chevron had expected and requested that this hearing be held earlier,” the companies said in a joint statement. “But the arbitrators’ common schedules did not make this possible.”

The delay is a significant blow to the embattled deal, which remains far from completion more than nine months after it was announced. It is still under review by the US Federal Trade Commission, which plans to delay its decision whether to try to block the merger until after the arbitration case is settled, according to people familiar with the matter.

A spokesman for Hess said the company continues to expect the FTC will complete its review in the third quarter. Chevron, meanwhile, has said it’s confident it will prevail in arbitration.

“The views of Chevron and Hess on the merits remain unchanged,” the companies said Wednesday. “Exxon and Cnooc continue to ignore the plain language of the operating agreement, and Chevron and Hess remain confident.”

Chevron announced its agreement to buy Hess in October, marking what would be the company’s biggest takeover in two decades. The centerpiece was Hess’s 30% stake in a giant Guyanese oil field controlled by Exxon, the largest oil discovery of the past decade.

Exxon operates the block and owns a 45% stake. It claims the contract governing the block contains a right-of-first-refusal over Hess’s stake. Hess claims it doesn’t apply because the deal is structured as a corporate merger rather than an asset sale.

Chevron has said it would scrap the entire deal to buy Hess if the company’s stake was not included in the transaction. 

Hess investors approved the Chevron takeover in May by just 51% after several large shareholders and Institutional Shareholder Services Inc. argued the vote should be delayed until after the arbitration case. The investors expressed concern that they would not receive Chevron dividends until the deal is complete, eroding the value of the transaction. 

(Adds comment from Hess spokesman in the seventh paragraph.)

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