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Chevron-Hess deal could face possible challenge from Exxon

Chevron (CVX) could be facing challenges from Exxon Mobil (XOM) and CNOOC Limited (0883.HK) in the oil producer's acquisition of Hess (HES). Exxon and CNOOC are considering demonstrating their preemptive rights to counter Chevron's offer and stake in Hess' drilling operations in Guyana.

Yahoo Finance Senior Business Reporter Ines Ferré breaks down all the details

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Luke Carberry Mogan.

Video transcript

SEANA SMITH: Well, Chevron's $53 billion mega deal for Hess might be at risk. Exxon and China's CNOOC are saying that they have a right to counter Chevron's bid for Hess's stake in an oil project off the Coast of Guyana. Now we went head over to Yahoo Finance's Ines Ferré standing by to break it all down for us. Ines, this could be the start of a very, very longstanding dispute.


INES FERRÉ: That's right, a lengthy one. Now Chevron announced that it was buying Hess last year. You'll recall that. And a big reason for that deal was because of Hess's Guyana oil block asset. Now ExxonMobil and China National Offshore Oil Corporation, CNOOC, are asserting their right. They're saying to pre-empt the purchase of that stake in that oil project, which is a key part of the merger deal.

Exxon owns about 45% in the Stabroek project, of which it's also an operator. And CNOOC owns about 25% of that project. The other 30% is owned by Hess. And it would be passed on to Chevron as part of the deal.

Now in a statement, ExxonMobil said that it is engaged in conversations with Hess and Chevron, and those conversations are going to continue. They also said we owe it to our investors and partners to consider our pre-emption rights in place under our joint operating agreement to ensure we preserve our right to realize the significant value we've created and are entitled to in the Guyana asset.

There was little interest really in Guyana. This is a small country next to Venezuela until ExxonMobil made a big discovery in 2015. And since then, they've made dozens of other discoveries in the region. But this really underscores that value in the Guyana project. It's also a crown jewel for Hess. And this is part of the reason-- a big reason why Chevron wants Hess.

In a statement, a Chevron spokesperson said that there is no possible scenario in which Exxon or CNOOC could acquire Hess's interest in Guyana as a result of the Chevron-Hess transaction.

What is the Street reaction to this? Well, we're seeing that Hess is down about 3%. Chevron is slightly lower. ExxonMobil up about 8/10 of a percent. This likely could be something that could be extended. I haven't heard any analysts, though, guys, that are saying that the deal is off because of this, but certainly a challenge or a roadblock, so to speak.

BRAD SMITH: Well, we'll certainly be keeping tabs on whether any of the analysts change their tune for sure. Yahoo Finance's reporter, Ines Ferré, excellent job breaking that down, Ines.

INES FERRÉ: Thank you.