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ExxonMobil (XOM) Eyes Guyana Stake, Aims to Oust Chevron
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Exxon Mobil Corporation (XOM - Free Report) and CNOOC Ltd. are considering exercising their rights to acquire Hess Corporation’s (HES - Free Report) stake in a major offshore oil development in Guyana.
The move threatens to disrupt Chevron Corporation’s (CVX - Free Report) ambitious $53-billion acquisition aimed at securing a 30% interest in the lucrative Guyana oil block, a deal central to Hess’ offerings.
ExxonMobil announced its potential preemption of Chevron’s acquisition, signaling a brewing dispute over the Stabroek block. The contention arises around ExxonMobil’s claim of a right to first refusal on any sale related to the Stabroek block, challenging Chevron’s deal directly.
ExxonMobil, which began exploring oil in Guyana in 2015, has uncovered reserves of 11 billion barrels. The firm anticipates its production in the region to surge to 1.2 million barrels daily by 2027.
The conflict between these oil giants could lead to the unraveling of Chevron’s $53-billion agreement with Hess. The fallout could impose a $1.7-billion breakup fee on Hess, further complicating the transaction.
The dispute also casts a spotlight on the intricate relationships and partnerships among these oil industry behemoths, particularly given ExxonMobil and Chevron’s collaborations in other ventures. Analysts view this contention as indicative of the high value placed on the Guyana operations, suggesting that ExxonMobil perceives Chevron’s entry as undervaluing the asset.
ExxonMobil, with a commanding 45% stake, currently leads all production operations in Guyana, partnering with Hess and China’s CNOOC. Chevron’s October proposal to acquire Hess, primarily for the Guyana stake, now faces uncertain prospects amid these tensions.
Despite the ongoing dispute, Chevron remains hopeful about finding a resolution that prevents any delays or disruptions to the merger. However, the shadow of arbitration hangs over the situation if an agreement cannot be reached, with Chevron and Hess maintaining that the right of first refusal clause does not apply to this merger.
This conflict not only risks changing the dynamics of a significant transaction but also highlights the global significance of Guyana’s oil reserves. Guyana’s initiative to invite more major oil companies through a recent auction of offshore blocks is a strategic move to expand its energy sector and diminish ExxonMobil’s dominance.
Zacks Rank & Stock to Consider
Currently, ExxonMobil carries a Zack Rank #3 (Hold).
Murphy USA Inc. (MUSA - Free Report) is a leading independent retailer of motor fuel and convenience merchandise in the United States.
The Zacks Consensus Estimate for MUSA’s 2024 and 2025 EPS is pegged at $25.58 and $25.36, respectively. The company has a Zacks Style Score of A for Growth and B for Value. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days.
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ExxonMobil (XOM) Eyes Guyana Stake, Aims to Oust Chevron
Exxon Mobil Corporation (XOM - Free Report) and CNOOC Ltd. are considering exercising their rights to acquire Hess Corporation’s (HES - Free Report) stake in a major offshore oil development in Guyana.
The move threatens to disrupt Chevron Corporation’s (CVX - Free Report) ambitious $53-billion acquisition aimed at securing a 30% interest in the lucrative Guyana oil block, a deal central to Hess’ offerings.
ExxonMobil announced its potential preemption of Chevron’s acquisition, signaling a brewing dispute over the Stabroek block. The contention arises around ExxonMobil’s claim of a right to first refusal on any sale related to the Stabroek block, challenging Chevron’s deal directly.
ExxonMobil, which began exploring oil in Guyana in 2015, has uncovered reserves of 11 billion barrels. The firm anticipates its production in the region to surge to 1.2 million barrels daily by 2027.
The conflict between these oil giants could lead to the unraveling of Chevron’s $53-billion agreement with Hess. The fallout could impose a $1.7-billion breakup fee on Hess, further complicating the transaction.
The dispute also casts a spotlight on the intricate relationships and partnerships among these oil industry behemoths, particularly given ExxonMobil and Chevron’s collaborations in other ventures. Analysts view this contention as indicative of the high value placed on the Guyana operations, suggesting that ExxonMobil perceives Chevron’s entry as undervaluing the asset.
ExxonMobil, with a commanding 45% stake, currently leads all production operations in Guyana, partnering with Hess and China’s CNOOC. Chevron’s October proposal to acquire Hess, primarily for the Guyana stake, now faces uncertain prospects amid these tensions.
Despite the ongoing dispute, Chevron remains hopeful about finding a resolution that prevents any delays or disruptions to the merger. However, the shadow of arbitration hangs over the situation if an agreement cannot be reached, with Chevron and Hess maintaining that the right of first refusal clause does not apply to this merger.
This conflict not only risks changing the dynamics of a significant transaction but also highlights the global significance of Guyana’s oil reserves. Guyana’s initiative to invite more major oil companies through a recent auction of offshore blocks is a strategic move to expand its energy sector and diminish ExxonMobil’s dominance.
Zacks Rank & Stock to Consider
Currently, ExxonMobil carries a Zack Rank #3 (Hold).
Investors interested in the energy sector might look at the following company that presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Murphy USA Inc. (MUSA - Free Report) is a leading independent retailer of motor fuel and convenience merchandise in the United States.
The Zacks Consensus Estimate for MUSA’s 2024 and 2025 EPS is pegged at $25.58 and $25.36, respectively. The company has a Zacks Style Score of A for Growth and B for Value. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days.