Hess CEO Disqualified From Merged Chevron Board, FTC Says – Orange County Register

By Kevin Crowley and Leah Nylen | Bloomberg

US antitrust regulator will allow Chevron Corp. proceed with the acquisition of Hess Corp. for $53 billion, on condition that CEO John Hess is removed from the supermajor’s board, alleging he improperly communicated with OPEC.

The Federal Trade Commission said in a statement Monday that Hess has communicated with the cartel and its allies, praising their efforts to stabilize oil production and draw down inventories, measures that typically raise prices. Chevron has agreed to a consent agreement with the FTC that will allow the acquisition to move forward.

“Sir. Hess’s communications with competitors regarding global oil production and other dimensions of competition in the crude oil market disqualify him from serving on Chevron’s Board of Directors,” said Henry Liu, director of the FTC’s Office of Competition. .

The FTC voted 3-2 in favor of the settlement. The two dissenting commissioners criticized the decision as politically motivated, saying there were no competition concerns or broken laws. Commissioner Melissa Holyoak called it a sequel to the “fairy tale” reasoning the FTC used to block former Pioneer Natural Resources Co. CEO Scott Sheffield from joining the Exxon Mobil Corp. board.

“Unfortunately for Mr. Hess,” she wrote, “the author of every fairy tale must also manufacture a villain, and today’s action has unjustifiably given him that label.”

The FTC’s complaint alleged that Hess frequently encouraged the cartel’s efforts to curb oil supplies, citing public comments and private correspondence with OPEC Secretary General Haitham Al-Ghais and his predecessor, Mohammad Barkindo. It also cited private communications with an unidentified senior Saudi government official. Elevating Hess to Chevron’s board of directors would increase “industry coordination risk,” the agency said.

Hess said in a statement that the concerns raised by the FTC were without merit. Separately, Chevron said John Hess will serve the company as a consultant on government relations and social investments in Guyana, where his company has a stake in a huge offshore oil field.

“I have the utmost respect for John, the company he built and the contributions he made to our industry,” Chevron CEO Mike Wirth said in the statement. “It is regrettable that our Board of Directors will not benefit from their decades of global experience.”

The Hess family’s stake in the company founded by John Hess’s father nearly a century ago is worth about $5 billion, according to the terms of the acquisition deal announced in October. Hess, 70, is expected to become one of Chevron’s largest shareholders when the deal closes.

The settlement marks the second time this year that the FTC has banned a senior oil industry executive from joining a suitor company’s board. The agency reached a settlement with Exxon in May that prevented Pioneer’s Sheffield from obtaining a board position, citing texts and emails that it alleged were “collusive activities” with OPEC officials.

Sheffield denied any wrongdoing and accused the FTC of “publicly and unjustifiably defaming him.”

For Chevron, the end of the antitrust review clears a key hurdle for the company’s biggest transaction since its acquisition of Texaco Inc. in 2001. To close the Hess deal, Chevron still needs to prevail in arbitration over rights claims. preferably from Exxon and Cnooc. Ltd. to Hess’s most important asset—his 30% stake in the Guyana oilfield.

The FTC opened an in-depth investigation into the Chevron-Hess transaction in December amid a boom in deals in the oil industry. Democratic lawmakers have asked the agency to study the deals more closely over concerns they could raise energy prices for consumers and suppress workers’ wages.

The FTC conducted similar investigations into Occidental Petroleum Corp.’s acquisition of shale driller CrownRock LP. and Diamondback Energy Inc.’s purchase of Endeavor Energy Resources LP, opting in both cases not to contest the transactions. The agency also declined to challenge Chesapeake Energy Corp.’s acquisition of Southwestern Energy Co.

(Updates with FTC complaint in sixth paragraph.)

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Originally published: September 30, 2024 at 10:30 am