Exxon and Chevron Have a Case of the Hiccups
On an idyllic California day last October, the nation’s second-largest energy major made a game-changing acquisition. In a stunning announcement less than two weeks after Exxon’s $59.3 billion merger with Pioneer Natural Resources, Chevron inked a $53 billion, love-you-bye deal with Hess Corporation. The race to build bigger positions, stockpile inventory, and grow production had officially laid hot rubber with a deafening screech where others followed. And while the Exxon and Chevron deals couldn’t have been more different, the two biggest E&Ps stateside suddenly found themselves sharing one of the biggest oil discoveries of all time.
Reese Energy Consulting today is following the latest news from Exxon and Chevron, now in a mess of a tangle offshore Guyana—South America’s Crude Oil Gift That Keeps Giving. If details of the separate deals by Exxon and Chevron escape you, Exxon went whole hog in the Permian buying Pioneer, while Chevron said, “Hello, Cinderella” to a 30% interest in Guyana’s Stabroek offshore block buying Hess. Exxon has made no less than 30 oil discoveries there since 2015 and the wine continues to flow with proved reserves of 11+ BBOE. Independent analysts suggest as much as 20 BBOE.
But here comes the hiccups. Exxon claims it has a right of first refusal on any sale of the Stabroek by its consortium partners, which also includes CNOOC. Chevron suggests the Hess deal may not close if Exxon doesn’t play nice, which could lead to a $1.7 billion breakup fee payable by Hess. No winners here, except for CNOOC. And somehow, that ain’t right. In the months to come (hopefully sooner), we look forward to an amicable agreement between the two. We also know of at least six ways to stop the hiccups.