There is a risk of failure in Chevron's $60 billion (approximately RMB 431.8 billion) acquisition by the American oil company.
On February 26th local time, a document submitted by Chevron to the US Securities and Exchange Commission showed that its acquisition of Hess Corporation was at risk of not being completed within the expected time, and may even be unable to complete the acquisition of Hess.
One of the key issues is the issue of the right of first refusal clause in the joint operation agreement for the Stabroek block off the coast of Guyana.
The total recoverable resources of the Stabroek block are approximately 11 billion barrels of oil equivalent, with Hess holding 30% equity, while the remaining 45% and 25% are held by ExxonMobil and CNOOC (600938. SH), respectively. According to the original agreement, the latter two have the right of first refusal for any ownership change in the Stabroek block.
ExxonMobil stated in a statement on February 26th, "We have a responsibility to consider the right of first refusal under the Joint Operating Agreement, ensuring that we retain the corresponding rights and realize the significant value that the company has created and is entitled to in Guyana assets, which is our responsibility to shareholders and partners."
This statement also adds more uncertainty to the aforementioned mergers and acquisitions. If ExxonMobil and CNOOC exercise the right of first refusal, it will hinder Chevron's acquisition of Hess.
Hess and Chevron have discussed the above matters with ExxonMobil and CNOOC regarding the Stabroek block.
Chevron stated that if the discussion cannot produce an acceptable solution, and if it cannot be confirmed in possible arbitration that the right of first refusal clause does not apply to the merger, the delivery conditions under the merger agreement will not be valid. In this case, the merge will not be completed.
In addition, Chevron's completion of its acquisition of Hess also depends on a series of conditions, including regulatory approval and Hess shareholder approval of the merger agreement.
If these regulatory conditions impose requirements, restrictions, etc. on the company's business behavior after the transaction, it will cause significant delays in the completion of the acquisition, which may result in Chevron realizing some or all of its benefits later than expected, and generate additional transaction costs or other related negative impacts.
Chevron therefore stated that the above-mentioned acquisition may result in financial results that differ from the company or the investment community's expectations, inability to achieve the expected benefits of the acquisition, and disruption to the company's current plans or operations.
Last October, Chevron announced that it would acquire competitor Hess for a full stock transaction of $53 billion, expected to be completed in the first half of 2024. The total value of the enterprise in this transaction, including debt, is 60 billion US dollars. Hess CEO John Hess is expected to join Chevron's board of directors.
According to the announcement, Chevron will acquire equity in the Guyana Stabroek block, which has abundant reserves and strong production growth prospects, as well as its core assets located in the Bakun Shale Basin in the United States.
Hess is one of the main producers of Bakun, an important shale oil producing region in the United States. The above acquisition will directly expand Chevron's assets in Bakun and the Gulf of Mexico. Chevron had anticipated that with these new assets, it would increase oil sales by 2028 and generate pre tax earnings of $10-15 billion from this acquisition.
Last May, Chevron also announced the acquisition of US shale developer PDC Energy for $6.3 billion.
By acquiring PDC Energy Company, Chevron will acquire high assets located near the DJ Basin and Permian Basin. The total value of this transaction is 7.6 billion US dollars, including stock and debt transactions. By integrating PDC Energy's assets, Chevron's goal is to nearly double the production of the DJ Basin to 400000 barrels per day.
Regarding the acquisition cases of DC Energy and Hess, Chevron stated in recent documents that the success of these two acquisitions will depend in part on its ability to integrate the various businesses of the two companies and achieve expected benefits, including synergies.
Chevron stated that the difficulties in integrating PDC and Hess may result in the inability to achieve the expected synergies within the expected time frame and operational challenges, coupled with unforeseeable expenses related to the acquisition, which may have an adverse impact on its financial performance.
Chevron's financial report shows that the company's net profit attributable to ordinary shareholders for the fiscal year 2023 was $21.369 billion, a year-on-year decrease of 39.75%; The operating revenue was 2009.49 billion US dollars, a year-on-year decrease of 18.4%.
In response to the aforementioned acquisition risks, Interface News contacted Chevron China headquarters and CNOOC, but did not receive a response as of the time of publication.