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Hess (HES) Faces Legal Hurdles Over Chevron Deal Disclosures

Hess Corporation (HES) is currently embroiled in three lawsuits challenging the adequacy of its disclosures regarding its proposed $53 billion sale to Chevron Corporation CVX.Hessrecently revealed in an 8-K filing that despite considering the allegations baseless, the company is taking steps to address the claims by voluntarily supplementing its proxy statement. This move is intended to preemptively address the plaintiffs' concerns and prevent any potential delays, expenses, or nuisance litigation.

Background of the Chevron Deal

In October 2023, Chevron proposed a $53 billion acquisition of Hess. The strategic move was aimed at strengthening Chevron's presence in Guyana's oil-rich offshore fields. However, the deal has encountered significant obstacles, including the need for regulatory approval from the Federal Trade Commission. The resolution of these issues is crucial for the progression of the acquisition.

Class Action in Delaware Court of Chancery

One of the three lawsuits, a class action complaint, has been filed in the Delaware Court of Chancery. This suit accuses the Hess board of breaching its fiduciary duties by allegedly failing to disclose material information in the Apr 26 proxy statement. The plaintiffs are seeking an injunction to halt the merger until their concerns are addressed.

Shareholder Demand Letters

In addition to the lawsuits, several Hess shareholders have sent demand letters echoing similar claims of disclosure deficiencies. These letters reinforce the legal pressure on Hess to provide more comprehensive information about the proposed sale.

Upcoming Shareholder Vote

Despite these legal challenges, Hess shareholders are scheduled to vote on the Chevron takeover on May 28. The outcome of this vote and the company's proactive measures to supplement its proxy statement will likely be pivotal in determining the future of the merger.

Conclusion

Hess maintains that the lawsuits lack merit but is choosing to amend its disclosures to mitigate any legal disruptions and ensure a smoother process for the impending merger vote. The legal battles and shareholder concerns surrounding Hess's proposed sale to Chevron are significant hurdles that need to be addressed promptly.

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As the May 28 vote looms, all eyes will be on how Hess navigates these challenges and whether the merger will proceed as planned. The developments in this high-profile acquisition will likely have far-reaching implications for the oil industry and the key players involved.

Zacks Rank & Other Key Picks

Hess currently carries a Zack Rank #2 (Buy).

A couple of other top-ranked stocks for investors interested in the energy sector are Marathon Petroleum Corporation MPC and SM Energy Company SM. While Marathon Petroleum sports a Zacks Rank #1 (Strong Buy), SM Energy carries a Zack Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Marathon Petroleum's acquisition of Andeavor has expanded its foothold in the Permian Basin, creating an enviable retail and marketing portfolio. MPC’s emphasis on operational excellence, safety, and environmental responsibility, coupled with investments in low-carbon initiatives, positions it well for sustainable growth and continued value creation for shareholders.

The Zacks Consensus Estimate for MPC’s 2024 earnings per share (EPS) is pegged at $19.28. The company has a Zacks Style Score of A for Value. It has witnessed upward earnings estimate revisions for 2025 in the past 30 days.

SM Energy is set to expand its oil-centered operations in the coming years with an increasing focus on crude oil, especially in the Permian Basin and Eagle Ford regions. The company’s attractive oil and gas investments can create long-term value for shareholders.

The Zacks Consensus Estimate for SM’s 2024 EPS is pegged at $6.60. The company has a Zacks Style Score of B for Value. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

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Chevron Corporation (CVX) : Free Stock Analysis Report

Hess Corporation (HES) : Free Stock Analysis Report

SM Energy Company (SM) : Free Stock Analysis Report

Marathon Petroleum Corporation (MPC) : Free Stock Analysis Report

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