The arbitrators of the ExxonMobil-Hess three-person arbitration panel have been selected, which will clear a key obstacle to the long-delayed merger process between Chevron (CVX.US) and Hess (HES.US). The arbitration panel will resolve ExxonMobil's (XOM.US) claim against Chevron's plan to acquire Hess.

In October 2023, Chevron announced that it would acquire Hess for $53 billion in an all-stock deal. Including debt, the total enterprise value of the transaction is $60 billion. The transaction has received unanimous approval from the boards of directors of both companies and is expected to be completed in the first half of 2024.

However, in February of this year, Chevron said that the acquisition of Hess might fall through, and the main problem that prevented the acquisition of Chevron was the Stabroek oil field project in Guyana. Public information shows that the Stabroek oil field in Guyana is one of Hess's core assets, with an estimated recoverable resource of about 11 billion barrels of oil equivalent. Chevron sees the Stabroek oil field in Guyana as an "extraordinary asset" with industry-leading cash profit margins and low carbon levels, with expected production growth over the next decade.

However, another major shareholder in the field, ExxonMobil (which owns 45% of the project, higher than Hess's 30% stake), claims the right of first refusal to this asset. ExxonMobil and Hess signed a private contract to manage the Stabroek block in Guyana, including a right of first refusal clause. ExxonMobil filed for arbitration with the International Chamber of Commerce in March.

Chevron previously stated in a regulatory filing that the clause did not apply because it was acquiring all of Hess's assets and not just the Guyana assets. ExxonMobil disagreed and said it was committed to enforcing the right of first refusal for its shareholders "to realize the tremendous value we've created."

It is worth noting that at the end of May, Hess shareholders approved the acquisition by Chevron. Hess CEO John Hess said, "We are pleased that the majority of shareholders recognize the tremendous value of this strategic transaction and look forward to the successful completion of our merger with Chevron."

In addition, Chevron and Hess have informed investors that if ExxonMobil wins the arbitration, the pending transaction will be terminated and Hess will continue as an independent company, retaining its stake in the Stabroek block. The transaction between Chevron and Hess was originally scheduled to be completed in the first half of 2024, but has been delayed due to ExxonMobil's involvement.