Secret clause triggers a 20-month legal battle between Exxon and Chevron

A single line buried in an old contract kicked off a 20-month battle between ExxonMobil and Chevron over control of Guyana’s Stabroek Block, the biggest offshore oil discovery in years.

The confidential clause, signed more than ten years ago, became Exxon’s legal weapon in an arbitration case that nearly collapsed Chevron’s $53 billion acquisition of Hess Corp.

The fight dragged through courts, politics, shareholder meetings, and regulatory blocks, all centered around who had the right to own a piece of an estimated $1 trillion oil jackpot.

According to Bloomberg, the feud first boiled over in late 2023, just weeks after Exxon closed its $60 billion purchase of Pioneer. Chevron tried to catch up by announcing a deal to buy Hess, whose 30% stake in Guyana’s Stabroek Block was the crown jewel.

Exxon held 45% and operated the field, with China’s Cnooc owning the other 25%. But a clause in their joint agreement gave partners the first right to buy each other’s stakes before any outsider. Chevron thought it didn’t apply to corporate mergers. Exxon disagreed.

Exxon’s surprise arbitration hit kills friendly vibes

Chevron’s CEO Mike Wirth and Hess CEO John Hess celebrated the merger publicly in New York, calling each other “the best CEO in the industry” and hyping their relationship with global partners. Exxon, based in Texas, didn’t share that joy. Its executives were irritated by Chevron’s behavior and what they saw as a takeover of something they built, without being asked first.

The clause in question gave Exxon and Cnooc the first opportunity to buy any stake being sold in the partnership. Chevron’s lawyers argued the rule didn’t count because the Hess purchase was a stock deal, not a direct asset sale. But nobody cleared that interpretation with Exxon. To Exxon’s CEO Darren Woods and Senior VP Neil Chapman, it was a change of control, and that triggered the clause.

By early 2024, negotiations were going nowhere. Chevron was forced to disclose the standoff in a regulatory filing. On March 6, Chapman stunned a crowd at a Morgan Stanley lunch event in New York by announcing Exxon had taken the matter to arbitration. “We understand the intent of this language, of the whole contract, because we wrote it,” he said, while investors listened in silence. Wirth only found out the night before, during a phone call with Woods.

That surprise shook the market. Hess shares dipped below Chevron’s offer price. Arbitrage funds like Millenium and Adage poured in, betting more than $5 billion combined that the deal would still close. They bought Hess and shorted Chevron, hoping to profit from the spread if the deal survived.

Regulators, politicians, and investors all push back

As the legal drama escalated, more problems piled up. Senator Chuck Schumer asked the Federal Trade Commission in May 2024 to block the merger, claiming it could raise prices for Americans already dealing with inflation. Then, proxy adviser Institutional Shareholder Services told Hess shareholders to reject the deal. Hedge funds like HBK Capital and D.E. Shaw backed out.

Worried about losing the vote, John Hess rushed across New York, London, and Los Angeles, trying to secure support. People who met him said he looked overwhelmed and wasn’t open to arguments. He said Chevron’s offer was the best option available.

Exxon kept its messaging tight. “This is a business issue — this is not a personal one,” Woods said at the time. He claimed Exxon didn’t want to buy Hess and only filed arbitration to confirm the value of its rights in the deal. But Wirth was done playing nice. He felt Exxon’s move killed any chance of a peaceful settlement.

Then the FTC dropped a bomb. In July, it launched a probe into whether John Hess and other shale executives had worked with OPEC during the COVID-19 crash to raise oil prices. The FTC later agreed to clear the deal only if Hess didn’t join Chevron’s board. Chevron accepted. Hess denied the allegations, which were later thrown out. Many believed the case was politically driven by President Joe Biden’s dislike for the oil sector.

Meanwhile, lawyers across London dug into the fine print. The Stabroek contract wasn’t public, but investors studied a similar one from the Association of International Energy Negotiators. That version said the clause didn’t apply if control stayed within an affiliated company. Since the Guyana stake would still be held by Hess’s unit, just under new Chevron ownership, Chevron and Hess believed that the clause didn’t apply. Exxon said that was just a loophole to dodge the intent of the contract.

The contract followed English law, where the wording carries more weight than interpretation. Wirth and Hess believed that gave them the edge. And by May 2024, Hess barely squeezed a win, getting 51% shareholder approval — helped by some hedge funds sitting out the vote.

But there was no victory lap. As months passed, John Hess publicly blasted Exxon’s tactics. At a dinner in New York, he said he was “disgusted” and insisted he never would’ve signed a deal that blocked him from selling his company. The merger had been announced a year earlier, and still, nothing was settled.

Finally, in July 2025, with Donald Trump back in the White House, the FTC, now under a new chair, reversed its decision. Hess was allowed to join Chevron’s board. Hours later, the arbitration panel ruled in Chevron’s favor. By 9:30 a.m. that Friday morning, Chevron had officially closed the takeover.

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