Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
ExxonMobil welcomed a later than expected start to its long-awaited arbitration case against rival Chevron over a lucrative oil find in Guyana, insisting the matter was “too important to rush” as it reported a jump in quarterly profits.
The two US oil companies have been at loggerheads over Chevron’s bid to acquire a stake in the oil-rich Stabroek Block off the coast of South America through its planned $53bn takeover of Hess. Exxon, which operates the project, has said it has a right of first refusal over the sale of Hess’s stake, and initiated arbitration proceedings this year that could torpedo the Chevron deal.
A hearing was set this week for May next year, with a ruling to be made in the following three months. Chevron had previously hoped for a decision in the fourth quarter of 2024.
The timeline means that the Hess transaction, the biggest in Chevron’s history, cannot close until the end of next year, if at all. Chevron has said it will abandon the transaction if the process finds in Exxon’s favour.
“We weren’t surprised by the timeline,” Kathy Mikells, Exxon’s chief financial officer, told the Financial Times.
“We’ve always thought that this matter is too important to rush through and that we were going to need to bring forward all the relevant facts to be taken into consideration — and that would take some time,” she said.
Chevron and Hess said on Wednesday that they had “expected and requested that this hearing be held earlier, but the arbitrators’ common schedules did not make this possible”. The companies previously indicated that the stand-off would be resolved this year.
Shares in Chevron and Hess fell 5 per cent and 8 per cent respectively on Thursday as investors fretted over the prolonged uncertainty.
Exxon on Friday posted earnings of $9.2bn for the second quarter, up from $7.9bn a year ago, driven by record production in Guyana and the Permian Basin of Texas and New Mexico. Analysts had expected a figure of $8.7bn after Exxon warned in July of a hit from weaker refining margins and natural gas prices.
The supermajor has increasingly sought to focus growth on higher margin oil production in Guyana — where it jointly owns the Stabroek Block alongside Hess and China’s Cnooc — and the Permian, America’s most prolific oilfield.
Exxon became the biggest producer in the Permian after it closed a $60bn deal for Pioneer Natural Resources in May. Overall output rose by 15 per cent or 557,000 barrels of oil equivalent a day during the quarter versus the previous three months.
Exxon this week finalised an exit from the North Sea through the sale of its remaining assets to Viaro Energy, ending a six-decade association with the declining basin.
“We have been divesting more mature assets for a number of years,” Mikells said of the move. “This is just consistent with that overall strategy of strengthening our portfolio and investing in more significant, lower-cost barrel, higher-profit barrel assets like Guyana and the Permian.”