Chevron CEO under pressure to halt share slide as Hess deal stalls

“There is a lot of pressure on Mike because of Hess,” said one of the people close to the company’s board. “It’s a make or break for Mike,” the person said.

Wirth has shown a knack for multi-billion-dollar acquisitions, picking up Noble Energy and PDC Energy in deals near the market bottom or that closed quickly.

“We aspire to be high performance, and you should expect the board to expect that,” Spiering said earlier this month in response to questions about the company’s performance.

Wirth was not available to comment and Chevron declined to make board members available for comment.

BIGGEST SHADOW

The biggest shadow over the company remains its dispute with Hess partners’ Exxon and CNOOC Ltd over their Guyana offshore holdings, which contain the world’s largest oil discovery in almost two decades. The deal originally was to close in the first half of this year, but a decision in the arbitration case may not be issued until the third quarter of next year.

The delay is crucial to Chevron because the deal closing would give the company a 30% stake in Guyana’s surging oil output, which last year delivered Hess a $1.88 billion net profit.

The stake would provide Chevron with long-lived oil production from a country with fewer geopolitical risks than its Venezuela or Kazakhstan operations, the latter of which accounts for nearly 20% of Chevron’s easily tapped oil reserves.

The Kazakh Tengizchevroil oil project, in which Exxon holds a 25% stake, is nearly three years behind an initial mid-2022 startup and has exceeded its original $37 billion budget by over $10 billion.

“If the (operational) issues continue or if the deal were to eventually fall apart, we could see further underperformance,” said Biraj Borkhataria, an analyst at RBC Capital.

VENEZUELA LICENSE?

Guyana, located on South America’s Atlantic coast, could help improve the quality of the company’s portfolio in Latin America, where it keeps a limited presence in Brazil, Argentina and smaller countries. The region excluding Venezuela has provided less than 2% of its global output for the past decade.

U.S. lawmakers and Venezuelan opposition leaders and activists have called for tighter restrictions on the company’s dealings in Venezuela.

Tax and royalties paid to the repressive Nicolas Maduro administration have propped up the government, they say. The July presidential election claimed by Maduro has been condemned as fraudulent by the U.S. and regional Organization of American States.

If Chevron’s license to operate in Venezuela were terminated or amended, which analysts say could happen if former President Donald Trump returns to office and restores his campaign against Maduro, the company could lose its right to export about 220,000 barrels per day of oil.

Chevron continues to make the case to U.S. authorities that it has been a force for good in Venezuela and has received continued six-month authorizations to remain there.

The No. 2 U.S. oil company is expected to post third quarter earnings on Friday of $4.26 billion, according to estimates compiled by financial firm LSEG, down 35% from the $6.53 billion a year ago on weaker oil prices and refining margins.

“Mike Wirth is in a pickle,” said Frederic Boucher, risk arbitrage analyst at Susquehanna Financial Group, a market maker for Chevron and Hess stocks.

“If you spend two years working on a deal, assuring investors you are right, only to be proven wrong, should you still be trusted with investors’ money?”

(Reporting by Sabrina Valle and Marianna Parraga in Houston, and Ron Bousso in London; Editing by Gary McWilliams and Anna Driver)