Chevron Completes Purchase of Hess After Winning Legal Battle Against Exxon

What Happened?

Chevron completed its takeover of rival Hess after winning a high-stakes legal dispute with Exxon Mobil on Friday. The $53 billion dollar deal had been delayed for the past two years due to a contract dispute which had been argued before the International Chamber of Commerce, which is located in Paris. The details of the dispute are not available to the public but involve some of the wording in the original contract. 

Exxon had argued that Hess couldn’t sell itself without first providing Exxon with the chance to purchase its own stake in the development, which is off the coast of Guyana. Chevron and Hess have long argued that Exxon was not interpreting the contract in Guyana correctly.

Why it Matters

Chevron, which is the second largest energy company in the United States, saw its stock rise two percent on Friday after the announcement. By contrast Exxon stock fell by a single percentage point after the news. Chevron’s CEO Steve Wirth issued a statement Friday morning saying, ‘The outcome’s not only good for Chevron, it’s also good for the entire industry.’

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By acquiring Hess Chevron gained part of a valuable oil project off the coast of Guyana, in South America. Chevron also gained a number of other assets in locations ranging from North Dakota to Southeast Asia. These new acquisitions will expand Chevron’s oil drilling opportunities, making it more competitive against its larger American rival, Exxon. 

In 2015, Exxon Mobil discovered vast amounts of oil just of the coast of Guyana. During the past decade since then, at least 11 billion barrels of crude have been discovered by Exxon in the same location. The influx of money from Exxon and other oil companies has dramatically altered Guyana’s economy and society. 

What was once an unnoticed and poor nation suddenly found itself with a sprawling network of new roads and infrastructure to support the extraction of oil. Guyana’s capital has seen a construction boom with new buildings and shops going up at a rapid rate. Guyana has even been called the new Qatar and its capital the next Dubai.

With demand for energy set to increase substantially in the next decade in the United States and around the world, the global race has been on between the major oil and gas companies. To find and secure the rights to new sources of crude like those under the waters off Guyana. The acquisition of Hess is a major win for Chevron, and it puts the company in a position to grow during the next decade.

How it Affects You

With the Trump Administration’s reduced regulations and increased tax breaks for big oil companies, the stage is set for Chevron and its competitors to grow and expand operations in the next several years. Increased crude production could lower energy prices but could also create new environmental problems.