Chevron Corp. has prevailed in a 20-month fight to buy Hess Corp. for $53 billion, overcoming a challenge by arch rival Exxon Mobil Corp. that was unprecedented in the modern history of Big Oil.

The ruling by an arbitration court allowing the deal to close is a major victory for Chevron, ending a period of strategic limbo that hurt its stock and prompted questions over the quality of the company’s due diligence when it agreed to buy Hess in October 2023. Chevron Chief Executive Officer Mike Wirth said he would walk away from the deal if they lost the case.

“This creates a premier international and oil and gas company,” Wirth said in an interview with Bloomberg Television.

Chevron shares initially rose as much as 3% in New York, then fell 1.1% in the afternoon. Exxon declined as much as 3.1%.

The clash between North America’s biggest energy producers was rare public feud in the oil sector, an industry in which companies routinely partner with each other to minimize project risk and share costs. Exxon, which operates and owns 45% of Guyana’s offshore Stabroek Block, claimed it had a right of first refusal over the disposition of Hess’s 30% stake.

Hess and Chevron, however, argued the right didn’t apply because their deal was structured as a corporate merger rather than an asset sale.

In an interview Friday, Wirth said the outcome of the deal was never in doubt.

“This was a straightforward plain reading of a contract,” he said. “It is unfortunate that Hess’ employees and Hess’ shareholders were put through this. It should have been resolved much quicker.”

The uncertainty surrounding the deal has been a “material contributor” to the underperformance of Chevron’s stock price compared to its rivals, Wirth said in November.

Acquiring Hess and its stake in Guyana significantly increases the quality of Chevron’s oil assets beyond the Permian Basin of Texas and New Mexico, narrowing the gap with Exxon, Hedgeye Risk Management, LLC Managing Director Fernando Valle said.

“Adding Guyana was critical for Chevron, because it’s go-forward portfolio was paltry outside of the Permian,” Valle said.

Both sides had expressed extreme confidence in their opposing positions on the wording of the Guyana contract, which was written more than 15 years ago.

“We wrote these documents — we understood the intent of those documents,” Exxon Chief Executive Officer Darren Woods said in December. “That gives us a lot of confidence in the position that we’ve taken.”

After the arbitration ruling Friday, Exxon said it had an obligation to shareholders to pursue the case.

“Given the significant value we’ve created in the development of the Guyana resource, we believed we had a clear duty to our investors to consider our preemption rights to protect the value we created,” the company said in its statement.

The deal’s completion is a win for arbitrage traders who were betting on the spread between Hess’s share price and the exchange ratio agreed with Chevron.

Hedge funds including Millennium Management, Pentwater Capital Management and HBK Investments LP had staked billions of dollars on the deal closing, according to data compiled by Bloomberg.

The deal calls for Hess shareholders will receive 1.0250 Chevron shares for each Hess share. Chevron plans intends to issue about 301 million shares of common stock as part of the transaction.

The U.S. Federal Trade Commission on Thursday opened the door for John Hess to join Chevron’s board, throwing out an order issued last year that barred him from doing so and accused him of colluding with OPEC.

“Mr. Hess is a highly respected industry leader, and our board would benefit from his global experience, relationships and expertise,” a Chevron spokesman said in a statement.

(With assistance from Mitchell Ferman.)

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