FTC to delay $53 billion Chevron-Hess deal until after ExxonMobil arbitration over assets offshore Guyana

(Bloomberg) – The U.S. Federal Trade Commission plans to delay its decision whether to block Chevron Corp.’s $53 billion takeover of Hess Corp. until after an arbitration case with Exxon Mobil Corp. is settled, according to people familiar with the matter.

The case with Exxon, which claims to have a right of first refusal over Hess’s biggest asset offshore Guyana, will likely take at least until the fourth quarter, meaning the FTC’s review will extend several more months. The agency plans to announce its decision when the arbitration is finished, said the people, who asked not to be named discussing an internal agency matter.

The delay is yet another blow to the embattled deal, which is still far from completion nearly nine months after it was announced in October. The agency has made second requests for information for several large deals in the oil and gas sector this year.

Chevron and the FTC declined to comment. Chevron previously has said it expected to have finished responding to the FTC’s in-depth request for information by mid-year.

“We continue to expect to complete the FTC review process during the third quarter,” Hess said in a statement.

Unless companies have an explicit timing agreement with the FTC, the agency has discretion on when to announce its decisions.

Shares of both companies fell on the news, pairing earlier gains. Hess was up 0.4% at 11:40 a.m., after earlier being up as much as 1.1% Chevron shares were up 0.6%, after rising 1% earlier.

The FTC allowed Exxon’s takeover of Pioneer Natural Resources Co. to move forward after alleging Scott Sheffield, Pioneer’s founder and former CEO, colluded with OPEC officials and blocked him from serving on the Texas oil giant’s board. Sheffield rejected the claims.

Chevron’s agreement to buy Hess, its biggest deal in two decades, has faced several hurdles, leaving both companies in strategic limbo.

In March, Exxon, which discovered and operates Guyana’s Stabroek Block, accused Chevron of attempting to “circumvent” its right to buy Hess’s 30% stake in the 11 Bbbl offshore oil field. Chevron and Hess rejected the charge, saying Exxon’s right doesn’t apply because the deal is structured as a corporate takeover rather than an asset sale.

But the case went to arbitration at the International Chamber of Commerce, a process that could take until the fourth quarter at the earliest. Exxon’s CEO Darren Woods has warned it could take longer.

In May, Hess investors approved the Chevron takeover by a razor-thin majority of 51% after several large shareholders and Institutional Shareholder Services Inc. argued the vote should be delayed until after the arbitration case. The investors expressed concern that they would not receive Chevron dividends until the deal is complete, eroding the value of the transaction.