U.S. Regulators Restrict Hess CEO from Board Seat in Chevron Acquisition

HOUSTON (Reuters) – U.S. antitrust regulators will bar Hess (NYSE:HES) CEO John Hess from taking a board seat as a condition of its go-ahead of oil producer Chevron (NYSE:CVX)’s $53 billion purchase of Hess, sources indicated.

The Federal Trade Commission’s consent for the deal will prohibit Hess from becoming a board member, although the reasons for this ban were not disclosed.

Chevron’s proposed all-stock acquisition of Hess, announced in October, is part of a series of multi-billion-dollar U.S. oil and gas industry mergers that began with Exxon Mobil’s (NYSE:XOM) purchase of Pioneer.

In its crackdown on megamergers, the FTC previously barred Pioneer Natural Resources (NYSE:PXD) CEO Scott Sheffield from joining the Exxon board as a condition of approval for their $60 billion merger.

It is unclear whether Hess will be permitted to assume another position at Chevron. He recently joined the board of financial firm Goldman Sachs.

Neither Hess nor Chevron responded to requests for comment, while the FTC declined to provide further information.

Shares of both Hess and Chevron dropped 1% in midday trading.

The expected approval leaves Exxon’s challenge to the Chevron-Hess deal as the final hurdle. Exxon and China’s CNOOC (NYSE:CEO) Ltd have initiated an arbitration case that might impede the deal, alleging the merger is a tactic to acquire Hess’s valuable Guyana assets.

Hess holds a 30% stake in Guyana’s significant Stabroek offshore block, which has seen over 30 oil and gas discoveries since 2015. Exxon, the block’s operator, owns 45%, while CNOOC holds 25%.

Bloomberg News previously reported that the FTC would prevent Hess from assuming a board seat in the merged company.

In another FTC case, it alleged that Sheffield had colluded with other U.S. oil firms and the Organization of the Petroleum Exporting Countries (OPEC) “to keep production artificially low” to boost profits. This was substantiated by meetings between shale and OPEC officials held over several years, including private dinners at a Houston energy conference.