Proxy Advisor Glass Lewis Urges Hess Shareholders to Accept Chevron Offer

By Gary McWilliams

HOUSTON (Reuters) – Hess shareholders are expected to vote in favor of Chevron’s $53 billion stock offer at the oil company’s May 28 special meeting, the advisor said on Thursday. vote Glass Lewis.

The terms of the proposed deal provide a reasonable valuation and offer upside potential for Hess shareholders, while the strategic and financial benefits of the proposed merger “are strong and reasonable, overall,” Glass Lewis said.

Chevron, the second-largest US oil producer, proposed last October to acquire rival Hess, aiming to gain a foothold in the lucrative offshore fields of oil-rich Guyana, where Hess has a 30% stake in a joint venture.

Hess’ partners in Guyana, Exxon Mobil and China’s CNOOC, filed arbitration proceedings in March claiming a right of first refusal over Hess’ assets in Guyana. Arbitration blocked the sale and surprised Chevron.

While the outcome of the arbitration is unclear, there is no guarantee that Exxon and CNOOC will exercise pre-emptive rights over Hess’ stake in Guyana’s giant Stabroek offshore field if they win their case, said Glass Lewis.

Exxon said it would evaluate its options based on the arbitration panel’s decision, but would not rule out acquiring Hess’ stake in the block.

Chevron could walk away from the purchase agreement without paying any compensation to Hess shareholders if Exxon and CNOOC win their arbitration, Glass Lewis said.

GIANT OIL FIELD

The Exxon, Hess and CNOOC joint venture has discovered more than 11 billion barrels of recoverable oil at Stabroek since 2015. The group has said it could install up to 10 production vessels this decade to increase output.

The Stabroek consortium pumps around 650,000 barrels per day (bpd) and aims to reach 1.2 million bpd by 2027.

The Exxon-led group oversees all of the country’s oil production. But Guyana is in talks with a consortium Petronas, TotalEnergies and QatarEnergy to drill a separate block.

Exxon operates the Stabroek block and has a 45% stake, while Hess has a 30% stake and CNOOC 25%.

A decision on arbitration between the companies may not be made this year, Exxon said. Chevron’s offer is also awaiting regulatory approval from the U.S. Federal Trade Commission.

Proxy consulting firms have mixed recommendations. Top U.S. adviser Institutional Shareholder Services on Monday urged shareholders to abstain from voting on the deal and allow more time for details of the arbitration process with Exxon to be revealed.

Pensions & Investment Research Consultants, a London-based consultancy, has issued an opinion in favor of the merger.

(Reporting by Gary McWilliams and Sabrina Valle in Houston; editing by Jamie Freed)