Exxon 'feels good' about arbitration over Hess's Guyana assets

ExxonMobil (XOM) saw record production in the Permian Basin after merging with Pioneer Natural Resources. Similarly, the oil and gas company also saw record production in Guyana, contributing to its second quarter earnings growth. Chief Financial Officer Kathryn Mikells joins Market Domination to discuss both of these operations and how they play into the overall outlook of the company.

"As we look at the combined now Pioneer-Exxon Mobil Permian operations, we see even more opportunities for synergies there which we're getting out in front of already. And so just as an example, Pioneer has a remote logistics operations that Exxon Mobil has now taken on and added into our remote wells and completions operations in order to drive more synergies across logistics and procurement. We are starting to utilize what is a very large water recycling infrastructure in the Midland Basin that Pioneer brings to the table," Mikells says of the merger. She notes that with Pioneer, Exxon has been able to further its commitment to reducing its environmental footprint and that there are more opportunities for synergies ahead.

Meanwhile, Hess (HES) shareholders approved an acquisition by Chevron (CVX) despite a dispute over Exxon's claim of a right of first refusal over Hess's Guyana assets. Mikells explains that the company feels "really good about the arbitration panel timeline," explaining that it is a situation that warrants "people to take time in order to really inform all the data and all the circumstances to interpret the joint operating agreement." A hearing is slated toward the end of May in 2025, with a final ruling to come by September 2025. Mikells adds, "if for some reason we were not successful in affirming the preemption that we have, our expectation would be that the Chevron-Hess transaction would move forward. But in the next breath, I would tell you we feel very good about our position in this arbitration being one of the parties that actually negotiated the agreement that's being discussed in the arbitration."

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Video Transcript

As we look at your last quarter, you had record production in the Permian because of the pioneer acquisition in part record production in Guyana.

Um If you could just briefly say what you think uh investors need to know about pioneer the integration.

Um and what's that gonna mean for cost savings and production going forward?

Yeah, absolutely.

We had record production in our own permian operations as well along with, as you mentioned, record productions from pioneers operation, record productions in our Guyana operation.

And so it was just really a strong operating uh quarter for the company overall.

And you know, as we look at the combined now Exxon Mobil Permian Operations, we see even more opportunities for synergies there which we're getting out in front of already.

And so just as an example, pioneer has a remote logistics operations that Exxonmobil has now taken on and added into our remote wells and completions operations in order to drive more synergies across logistics and procurement.

Uh We are starting to utilize uh what is a very large water recycling infrastructure in the Midland Basin that pioneer brings to the table.

And so looking to get those synergies which are also environmentally friendly, help us to reduce our environmental footprint.

Uh We're beginning to align overall specifications for the materials that we procure again, that'll drive both procurement synergies as well as supply chain synergies.

And then finally, I'd mentioned we're beginning to use our techniques in terms of what we call cube development, longer laterals in order to get at higher resource recovery more efficiently on the pioneer acreage.

So we feel like the integration planning and execution is going really well and that we can already see the opportunity for more synergies than we laid out at the time that we originally announced the acquisition.

So everything's going really well and, and Cathy finally, I feel like I gotta ask you a guy in a question as well.

And now this arbitration hearing over Chevron's proposed acquisition of hess, it's been pushed back, it looks like at least to mid 2025.

Um If Exxon does not prevail in that proceeding, what's the kind of game plan there?

What, what will Exxon then do?

Yeah.

So importantly, I'd start by saying we felt really good about the arbi arbitration panel timeline.

So we always felt like uh this was a situation that deserved for people to take time in order to really inform all the data and all the circumstances to the joint operating agreement, which is what the arbitration panel has in front of them.

And so they've set a hearing at the end of May of next year and said they'll make a final ruling by September.

And we think that's a timetable that allows them to really digest and take all the facts and circumstances into consideration.

And then to your question, Julie, kind of what happens if for some reason, we were not successful in affirming the preemption, right, that we have our expectation would be that the Chevron has transaction would move forward.

But in the next breath, I would tell you, we feel very good about our position in this arbitration being one of the parties that actually negotiated the agreement.

Uh That's being discussed in the arbitration.

Got you.

All right, Kathy.

Thank you so much for your time again.

Appreciate it.

All right.

Thanks so much Julie.

Really appreciate being here today.