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Hess Corporation (HES - Free Report) , entangled in a high-stakes merger with Chevron Corporation (CVX - Free Report) , finds itself navigating regulatory uncertainties that threaten to prolong the completion of a pivotal $53-billion deal, per recent reports by Reuters and Bloomberg News.
The U.S. Federal Trade Commission (“FTC”) is expected to conduct a comprehensive review of the proposed merger in the third quarter of 2024.
Originally slated for closure in the first half of 2024, the merger has encountered significant setbacks chiefly due to an arbitration initiated by Exxon Mobil Corporation (XOM - Free Report) . ExxonMobil’s claim of a right of first refusal over Hess’ prized assets in Guyana has triggered a prolonged legal process, complicating the timeline for regulatory approval.
Hess, a key player in Guyana's lucrative Stabroek block, alongside ExxonMobil and China's CNOOC Ltd, owns a crucial 30% stake in the venture. The partnership is aimed at doubling oil and gas production to 1.3 million barrels per day by 2027. Despite these ambitious growth plans, the unresolved arbitration poses uncertainties for Hess's strategic initiatives in the region.
Hess and Chevron had initially aimed to conclude the merger by the first half of this year. However, with the FTC's review now expected to extend into the latter half of 2024, the timeline remains uncertain, pending the resolution of the arbitration dispute.
Hess stated that the arbitration process is advancing, with hopes of resolving by the end of 2024. Despite ExxonMobil's indications that the proceedings could stretch into 2025, Hess is optimistic about concluding the legal dispute this year.
The FTC's decision to delay its verdict on the merger until the arbitration case is settled, potentially as late as the fourth quarter, poses further challenges for Chevron and Hess. This regulatory scrutiny is part of broader antitrust measures impacting major deals within the oil sector this year, reflecting the FTC's rigorous approach to consolidations that could influence market dynamics.
As both companies await the commencement of the arbitration panel's review, which is expected to outline proceedings soon, the outcome remains pivotal for the future trajectory of Hess and its merger ambitions with Chevron.
While the Chevron-Hess merger promises substantial synergies in the global energy landscape, regulatory hurdles and legal complexities underscore the arduous path toward its realization. The resolution of the arbitration with ExxonMobil stands as a critical determinant in shaping the timeline and viability of this landmark consolidation in the oil and gas sector.
Zacks Ranks & Other Stock to Consider
Hess currently flaunts a Zacks Rank #1 (Strong Buy).
USA Compression Partners, LP (USAC - Free Report) is one of the largest independent natural gas compression service providers across the United States in terms of fleet horsepower. USAC earns its revenues from the overall horsepower use of natural gas transported rather than the price. As such, the partnership is largely insulated from fluctuations in commodity prices.
The Zacks Consensus Estimate for USAC’s 2024 and 2025 EPS is pegged at 77 cents and 98 cents, respectively. USA Compression Partners has a Zacks Style Score of B for Growth. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.
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Hess (HES) Faces Regulatory Hurdles Amid Chevron Merger Delay
Hess Corporation (HES - Free Report) , entangled in a high-stakes merger with Chevron Corporation (CVX - Free Report) , finds itself navigating regulatory uncertainties that threaten to prolong the completion of a pivotal $53-billion deal, per recent reports by Reuters and Bloomberg News.
The U.S. Federal Trade Commission (“FTC”) is expected to conduct a comprehensive review of the proposed merger in the third quarter of 2024.
Originally slated for closure in the first half of 2024, the merger has encountered significant setbacks chiefly due to an arbitration initiated by Exxon Mobil Corporation (XOM - Free Report) . ExxonMobil’s claim of a right of first refusal over Hess’ prized assets in Guyana has triggered a prolonged legal process, complicating the timeline for regulatory approval.
Hess, a key player in Guyana's lucrative Stabroek block, alongside ExxonMobil and China's CNOOC Ltd, owns a crucial 30% stake in the venture. The partnership is aimed at doubling oil and gas production to 1.3 million barrels per day by 2027. Despite these ambitious growth plans, the unresolved arbitration poses uncertainties for Hess's strategic initiatives in the region.
Hess and Chevron had initially aimed to conclude the merger by the first half of this year. However, with the FTC's review now expected to extend into the latter half of 2024, the timeline remains uncertain, pending the resolution of the arbitration dispute.
Hess stated that the arbitration process is advancing, with hopes of resolving by the end of 2024. Despite ExxonMobil's indications that the proceedings could stretch into 2025, Hess is optimistic about concluding the legal dispute this year.
The FTC's decision to delay its verdict on the merger until the arbitration case is settled, potentially as late as the fourth quarter, poses further challenges for Chevron and Hess. This regulatory scrutiny is part of broader antitrust measures impacting major deals within the oil sector this year, reflecting the FTC's rigorous approach to consolidations that could influence market dynamics.
As both companies await the commencement of the arbitration panel's review, which is expected to outline proceedings soon, the outcome remains pivotal for the future trajectory of Hess and its merger ambitions with Chevron.
While the Chevron-Hess merger promises substantial synergies in the global energy landscape, regulatory hurdles and legal complexities underscore the arduous path toward its realization. The resolution of the arbitration with ExxonMobil stands as a critical determinant in shaping the timeline and viability of this landmark consolidation in the oil and gas sector.
Zacks Ranks & Other Stock to Consider
Hess currently flaunts a Zacks Rank #1 (Strong Buy).
Investors interested in the energy sector may look at another top-ranked company mentioned below. The company also presently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
USA Compression Partners, LP (USAC - Free Report) is one of the largest independent natural gas compression service providers across the United States in terms of fleet horsepower. USAC earns its revenues from the overall horsepower use of natural gas transported rather than the price. As such, the partnership is largely insulated from fluctuations in commodity prices.
The Zacks Consensus Estimate for USAC’s 2024 and 2025 EPS is pegged at 77 cents and 98 cents, respectively. USA Compression Partners has a Zacks Style Score of B for Growth. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.