Proxy adviser Glass Lewis advises Hess stockholders to accept the Chevron offer

Proxy adviser Glass Lewis has recommended that Hess shareholders vote in favour of Chevron’s $53 billion all-stock offer at the special meeting on May 28. Glass Lewis believes the terms of the deal offer a reasonable valuation and potential benefits for Hess shareholders, deeming the strategic and financial merits of the merger to be sound overall.

Chevron, the second-largest oil producer in the U.S., proposed acquiring Hess last October to gain access to Guyana’s lucrative offshore oil fields, where Hess holds a 30% stake. However, Hess’s partners in Guyana, Exxon Mobil and China’s CNOOC, have filed an arbitration case claiming a right of first refusal over Hess’s assets. This legal action has delayed the sale and caught Chevron by surprise.

Glass Lewis noted that the arbitration’s outcome is uncertain, and there is no guarantee that Exxon and CNOOC will exercise their preemption rights if they win. If they do, Chevron can withdraw from the purchase without compensating Hess shareholders. The Stabroek consortium, consisting of Exxon, Hess, and CNOOC, has discovered over 11 billion barrels of recoverable oil since 2015 and plans to significantly increase production in the coming years.

Meanwhile, regulatory approval from the U.S. Federal Trade Commission is still pending. Opinions among proxy advisory firms are divided; Institutional Shareholder Services has advised shareholders to abstain, while Pensions & Investment Research Consultants supports the merger.