Oil giant Chevron Corp. on Monday announced its purchase of Hess Corp. for $53 billion, but what that will mean for hundreds of Virgin Islanders seeking redress for asbestos injuries from a Hess subsidiary remains to be seen.
The deal will see Chevron acquire all of the outstanding shares of Hess in an all-stock transaction valued at $53 billion, or $171 per share based on Chevron’s closing price on Oct. 20, the company said in a press release. Under the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. The total enterprise value, including debt, of the transaction is $60 billion, according to the release.
“This strategic combination brings together two strong companies to create a premier integrated energy company,” Hess Corp. CEO John Hess said. “I am proud of our people and what we have achieved as a company, which has one of the industry’s best growth portfolios including Guyana, the world’s largest oil discovery in the last 10 years, and the Bakken shale, where we are a leading oil and gas producer,” he added, referring to the rock unit underlying parts of Montana, North Dakota, Saskatchewan and Manitoba.
Chevron has a world-class diversified portfolio of assets and one of the industry’s strongest balance sheets and cash return profiles, said Hess, who is expected to join Chevron’s board of directors. “I believe our strategic combination creates a company that is stronger in every respect, with the leadership, asset portfolio and financial resources to lead us through the energy transition and deliver significant shareholder value for years to come.”
The transaction has been unanimously approved by the boards of directors of both companies and is expected to close in the first half of 2024, according to Chevron. The acquisition is subject to Hess shareholder approval, regulatory approvals and other customary closing conditions.
The Source contacted Chevron for comment on the asbestos lawsuit and whether it will provide the funding to close out the case, being heard in Texas Southern Bankruptcy Court, but did not receive a reply.
Hess and its subsidiaries ran the Limetree Bay refinery on St. Croix’s south shore from 1965 to 1998 — when its partially owned subsidiary Hovensa was formed — allegedly exposing a generation of Crucians to unchecked toxins in their workplace.
Hess Oil Virgin Islands Corp. (HOVIC), now called HONX, filed for Chapter 11 protection in Houston in April 2022, claiming in court filings that given the number of plaintiffs in the asbestos case, it would take 40 years to litigate each claim in V.I. District Court.
Litigation of the cases has been moving at a snail’s pace since 1997 and 1998 when the first 400 cases were filed by people claiming illness due to asbestos and/or silica dust exposure from the refinery and St. Croix Alumina. In 2013 and 2014 alone, approximately 120 people sued Hess with claims of asbestos exposure during their employment, according to court documents. Over the years, the plaintiffs have been mostly employees of the Hess refinery, family members or people who lived in the vicinity.
Some of the plaintiffs have died before giving depositions and others have not been located because of the passage of time, slowing down the process. That prompted the V.I. Legislature to pass a law in September 2021 to grant seniors and the terminally ill preference in civil actions.
The Official Committee of Unsecured Creditors — seeking last year to have the case dismissed and the asbestos litigation heard outside of bankruptcy court — has alleged that HONX is just a hollow shell of a company that was revived to shield Hess Corp’s $37 billion in assets against the suits.
U.S. Bankruptcy Judge Marvin Isgur, who is presiding over the case in Houston, denied the motion to dismiss in December.
Numerous news reports have painted the U.S. Bankruptcy Court in Houston as a place companies go to get favorable rulings, with the Wall Street Journal characterizing it as “a premier landing spot for corporate reorganizations.”
Companies are known to take advantage of what is known as the “Texas two-step,” where they split into two parts — funneling assets into one and debts into the other, which then files for bankruptcy.
The dangers of asbestos — a fibrous, fire-resistant material that can lead to specific lung cancers — have been known since the 1930s and federally recognized as hazardous since the 1950s. The St. Croix refinery, built in the early 1960s and opened in 1965, is thought to have contained millions of pounds of asbestos. Court filings allege workers were routinely exposed, especially while cleaning up storm damage at the plant. They also may have unknowingly brought the toxic fibers home to their families as it clung to their clothing.
In May, Hess agreed to put $106 million into a trust for former refinery workers and their families injured by asbestos exposure on St. Croix. Its proposal set aside $90 million for claimants who already filed, $15 million for potential future claims, and $1 million to cover administrative costs of the trust. The oil giant also pledged $10 million more if new claims exceeded the $15 million allocated by 2030. However, the future claims representative in the case rejected the figures as too low and the deal collapsed.