The right of first refusal in oil and gas M&A transactions under joint operating agreements——A case study of Chevron's acquisition of Hess
Chevron's recent announcement of its acquisition of Hess has led to international arbitrations initiated by ExxonMobil and CNOOC,which have highlighted issues related to rights of first refusal in international oil and gas M&As.In the Association of International Energy Negotiators(AIPN)2023 Model JOA,the provisions regarding rights of first refusal,including the conditions for triggering such rights,have been streamlined and made more straightforward,thus allowing greater flexibility and discretion for the parties involved.The acquisition of Hess by Chevron was structured as a reverse triangular merger,a common structure in M&As involving publicly traded companies in the United States.As the acquisition would result in a change of control of Hess,it should trigger the rights of first refusal under the applicable JOA.This case offers valuable insights into the application of rights of first refusal in M&A practices:1)oil and gas M&A transactions need to consider whether the transaction brings about the application of the right of first refusal of the oil and gas assets involved,and if so,the waiver of the right of first refusal is a condition precedent to the delivery of the oil and gas transaction;2)it is necessary to consider the relevant mechanisms to deal with and respond to the transaction if the oil and gas M&A transaction is subject to the right of first refusal;3)it can be written in the joint operation agreement that"the public company M&A transaction is not subject to the right of first refusal agreed herein"in advance;4)the waiver rights of third parties entitled to exercise the right of first refusal are locked in in advance;5)the buyer needs to be certain that it can terminate the transaction without liability after the third party has exercised its right of first refusal.
international oil and gas M&Achange of controljoint operating agreementright of first refusal
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