Hess CEO's OPEC Communication Disqualifies Him From Chevron Board, FTC Says

US regulators will allow Chevron Corp. to move forward with its $53 billion acquisition of Hess Corp. but are barring Chief Executive Officer John Hess from joining the supermajor’s board, saying he improperly communicated with OPEC.

(Bloomberg) — US regulators will allow Chevron Corp. to move forward with its $53 billion acquisition of Hess Corp. but are barring Chief Executive Officer John Hess from joining the supermajor’s board, saying he improperly communicated with OPEC.

The US Federal Trade Commission said in a statement Monday that Hess communicated with members of the cartel and its allies, encouraging them to stabilize oil production and draw down inventories.

“Mr. Hess’s communications with competitors about global oil output and other dimensions of crude oil market competition disqualify him from serving on Chevron’s Board of Directors,” said Henry Liu, Director of the FTC’s Bureau of Competition. 

The FTC voted 3-2 in favor of the agreement. The two dissenting commissioners criticized the decision as politically motivated, saying there were no concerns over competition nor laws broken. Commissioner Melissa Holyoak called it sequel to the “fairy tale” reasoning the FTC used to block Pioneer Natural Resources Co. former Chief Executive Officer Scott Sheffield from joining Exxon Mobil Corp.’s board in May.

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

Hess said in a statement that the concerns raised by the FTC about John Hess’ OPEC communications were without merit. In a seperate statement, Chevron said John Hess will serve as an advisor to the company on government relations and social investments in Guyana, where his company has a stake in a massive offshore oil field. 

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

The Hess family’s stake in the company founded by John Hess’ father almost a century ago is worth about $5 billion under the terms of the takeover agreement announced in October. Hess, 70, stands to become one of Chevron’s biggest shareholders upon closure of the deal.

The agreement marks the second time this year the FTC has barred a senior oil executive from joining a suitor company’s board. The agency reached a settlement with Exxon in May that blocked Pioneer’s Sheffield from obtaining a directorship, citing texts and emails that it claimed amounted to “collusive activity” with OPEC officials. 

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

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

The FTC opened an in-depth probe into the transaction in December amid a burst of oil-industry dealmaking. Democratic lawmakers asked the agency to study the deals more closely on concerns they could increase energy prices for consumers and suppress wages for workers. 

The FTC conducted similar probes of Occidental Petroleum Corp.’s acquisition of Texas shale driller CrownRock LP, and Diamondback Energy Inc.’s purchase of Endeavor Energy Resources LP, opting in both cases against challenging the transactions. The agency also declined to challenge Chesapeake Energy Corp.’s takeover of Southwestern Energy Co. 

(Adds dissenting statements and comments from Hess and Chevron.)