Hess Faces Suits Alleging Lack of Transparency in Chevron Merger

Chevron Corp. and Hess Corp’s embattled merger has fallen into deeper uncertainty after three lawsuits were filed in the United States concerning the disclosure of purportedly material information relating to the $60 billion transaction.

The cases against Hess dispute the non-inclusion of certain details in filings with the U.S. Securities and Exchange Commission, mainly an April 26 filing that aimed to solicit proxies for a shareholder vote scheduled for May 28 on matters necessary to the completion of the merger. The cases seek to block the merger until Hess has rectified the disclosures, Hess said in a SEC filing on Tuesday.

In Tuesday’s regulatory disclosure, Hess added details to some parts of the April proxy statement “to moot plaintiffs’ disclosure claims and to avoid nuisance, potential expense and delay” but insisted the plaintiffs’ claims were “without merit”.

Among the additions, Hess revealed that Chevron’s letter of proposal for a combination contained an invitation to Hess chief executive John Hess to join the Chevron board post-merger. It also added details relating to how the price of Chevron’s acquisition of its smaller rival had been determined, as well as details on fees associated with the transaction.

The cases were filed in the Court of the Southern District of New York, the Delaware Court of Chancery and the Supreme Court of the State of New York.

“All of the defendants named in the matters believe that the matters are without merit”, Hess said. “However, litigation is inherently uncertain and there can be no assurance regarding the likelihood that the defense of the actions will be successful.

“Additional lawsuits arising out of the Merger or the Proxy Statement may also be filed in the future”.

Hess added, “In addition to these lawsuits, several purported stockholders of Hess have sent demand letters alleging similar deficiencies regarding the disclosures made in the Proxy Statement”.

Hess has already been dragged to court over the prospect of its stake in Guyana’s Stabroek block falling to the hands of Chevron as part of the merger. Chevron rival Exxon Mobil Corp. operates the block with a 45 percent interest through Esso Exploration and Production Guyana Ltd., while Hess subsidiary Hess Guyana Exploration Ltd. holds a 30 percent stake. China National Offshore Oil Corp’s CNOOC Petroleum Guyana Ltd. holds the remaining 25 percent.

ExxonMobil initiated arbitration proceedings March 6 before the International Chamber of Commerce tribunal asserting that pre-emption rights given to the Stabroek partners apply to Chevron’s acquisition of Hess. A pre-emption right or right of first refusal allows a partner to prevent a co-venturer from selling a stake to an outside party without first offering the stake to the partner.

Hess filed for arbitration March 11 with the opposite claim. China’s state-owned CNOOC followed suit March 15 with the same claim as ExxonMobil. The cases were confirmed in filings with the SEC.

Hess later told shareholders in a letter that the three Stabroek owners agreed to unify the arbitration cases into one. “On March 26, 2024, following a joint application by the parties, the authority administering the arbitration consolidated the three arbitration proceedings”, stated the letter, made public as an attachment to a SEC disclosure by Chevron April 24. 

Also in the U.S. Hess and Chervon are working to clear an anti-trust review by the Federal Trade Commission (FTC).

Meanwhile ExxonMobil’s acquisition of Pioneer Natural Resources Co., announced last October around the same time as Chevron’s acquisition of Hess and likewise subjected to an FTC investigation, had already been completed, as announced by ExxonMobil May 3.

To contact the author, email jov.onsat@rigzone.com