Chevron Corp (CVX)

[DewDiligence]

CVX-HES merger has a possible glitch:

https://www.sec.gov/ixviewer/ix.html?doc=/Archives/edgar/data/0000093410/000119312524046223/d576159ds4.htm (p.80)

Hess Guyana Exploration Limited (HGEL), a wholly owned subsidiary of Hess, is party to an operating agreement (the Stabroek JOA) with affiliates of Exxon Mobil Corporation (Exxon) and China National Offshore Oil Corporation (CNOOC), which governs the rights and obligations of such parties (the Stabroek Parties) with respect to the exploration and development of their respective interests in the Stabroek Block offshore Guyana (the Stabroek Block).

The Stabroek JOA contains a right of first refusal (the Stabroek ROFR) provision that, if applicable to a change of control transaction and properly exercised, provides the Stabroek Parties with a right to acquire the participating interest in the Stabroek Block held by the Stabroek Party subject to such transaction (at a value that is based on the portion of the value of the change of control transaction that reasonably should be allocated to such participating interest and is increased to reflect a tax gross-up) only after, and conditioned on, the closing of such transaction.

Chevron and Hess believe that the Stabroek ROFR does not apply to the merger due to the structure of the merger and the language of the Stabroek ROFR provisions. Following the announcement of the merger, Exxon and CNOOC informed Hess and Chevron that they disagree with this view and believe the Stabroek ROFR applies to the merger.

Hess, Chevron, Exxon and CNOOC have been engaged in constructive discussions regarding the Stabroek ROFR, and Chevron and Hess believe these discussions will result in an outcome that will not delay, impede or prevent the consummation of the merger. In the event such discussions do not result in an acceptable resolution, either Hess or Chevron could elect for HGEL to pursue arbitration to resolve the matter.

If the discussions with Exxon and CNOOC do not result in an acceptable resolution and arbitration (if pursued) does not result in a confirmation that the Stabroek ROFR is inapplicable to the merger, then there would be a failure of a closing condition under the Merger Agreement, in which case the merger would not close and, pursuant to the terms of the Stabroek JOA, Exxon and CNOOC would cease to have rights under the Stabroek ROFR with respect to the merger. In that event, Hess would remain an independent public company and would continue to own its participating interest in the Stabroek Block.

Based on their discussions with Exxon and CNOOC and the terms of the Stabroek JOA, Chevron and Hess do not believe there is any material likelihood that the circumstances described in this paragraph will occur.

Really? I find it hard to accept this (bottommost) assertion at face value.

HES is -4% in AH trading.