• Hess Corporation shareholders narrowly approved a $53 billion acquisition by Chevron, which may face challenges from Exxon Mobil over preemptive rights to Hess’ interest in Guyana’s oil fields; the arbitration could take months to resolve, but Hess and Chevron CEOs remain optimistic.
• This merger is part of a broader trend of increasing M&A activity in the energy sector, exemplified by ConocoPhillips’ $22.5 billion acquisition of Marathon Oil; energy M&A deal volume reached $230.8 billion in 2023, up 8.26% from 2022.
• Despite the surge in M&A activity, there is investor concern about whether capital from large oil companies like Chevron and ConocoPhillips could be better invested in renewable energy for sustainable growth, as these companies currently have a significant focus on crude oil and natural gas in their production mixes.

On Tuesday, May 28, Hess Corporation (NYSE:HES), reported in a Form 8-K the results of a shareholder vote regarding the proposed acquisition of Hess by Chevron Corporation (NYSE:CVX).

With a narrow 51%, the shareholders agreed to the $53bn proposed merger. The merger strategically exposes Chevron to Hess’ position in Guyana’s overshore, oil-rich fields. 

Although agreed to by shareholders, this merger may not be approved by the Federal Trade Commission, due to uncertainty regarding Exxon Mobil Corporation’s (NYSE:XOM) arbitration against Chevron concerning the Guyana oil fields. Exxon is Hess’ partner in Guyana and is bothered by Chevron’s interest in this position. Exxon claims they have the preemptive rights of Hess’ 30% interest in the Guyana oil fields. Both Chevron and Hess rebut this arbitration.

Although the arbitration may take months to resolve, the CEOs of Hess and Chevron are optimistic that the deal will go through.

The trend this follows is that of growing M&A activity within the energy sector.

Earlier this week, ConocoPhillips (NYSE:COP) agreed to buy Marathon Oil Corporation (NYSE:MRO) for $22.5bn.

These massive acquisitions contribute to the trend of increasing M&A volume year over year in the energy sector. According to PitchBook, energy M&A deal volume reached $230.8bn in 2023, an 8.26% increase from 2022. This increase inched the energy sector’s total deal volume closer to the technology sector’s deal volume at $454.1bn. The technology sector has been known for the high M&A deal volume, but now is being approached by energy.

With large petroleum and oil companies like Chevron and ConocoPhillips contributing to lively M&A transaction volume in this sector, some investors are concerned if these companies’ capital could be better invested in renewable energy segments that bring sustainable growth.

ConocoPhillips, for example, favors crude oil at about 52%, while natural gas and natural gas liquids account for about 14% in their production mix (according to their May 2023 FactSheet). Their acquisition of Marathon brings little diversification to this mix with Marathon’s production mix divided about 50/50 between oil and natural gas + natural gas liquids.