In a corporate cage match, two of the globe’s most dominant oil titans are fighting it out for a share of one of the world’s most coveted oil finds: Guyana. But while Chevron Corp (NYSE:CVX) and Exxon Mobil Corp (NYSE:XOM) are in the midst of arbitration, ETF investors may need to hold on tight. This courtroom battle could rock some of the largest energy ETFs available.

The Stakes: Oil, Ego — And An 11 Billion Barrel Bonanza

Behind the fight is Hess Corp’s (NYSE:HES) 30% interest in a huge Guyanese oil project, which has roughly 11 billion barrels in projected reserves. Chevron said in 2023 it agreed to buy Hess for $53 billion, a transaction that would put it at the front of the Guyana boom.

But Exxon, which already co-leads the Guyana project, says it has pre-emptive rights to the stake. Arbitration gets underway in London this week, and sometime in late summer, a panel will make a decision.

ETF Fallout: Who’s Exposed To What?

The heavy hitters such as Energy Select Sector SPDR Fund (NYSE:XLE), iShares U.S. Energy ETF (NYSE:IYE) and Vanguard Energy Index Fund ETF (NYSE:VDE) are carrying heavy loads of both Exxon and Chevron, between 35% and 40% combined weighting in each fund.

If either Exxon or Chevron prevails, one can anticipate a pop for these ETFs as the Guyana deal would mean long-term growth assets for the prevailing company.

Hess Corp. is smaller but essential in this saga. ETFs such as iShares U.S. Oil & Gas Exploration & Production ETF (BATS:IEO) carry meaningful exposure to Hess, and therefore a front-row seat to either a lucrative M&A payday or a disappointing fizz.

Additionally, merger arbitrage ETFs, such as NYLI Merger Arbitrage ETF (NYSE:MNA) and ProShares Merger ETF (BATS:MRGR), are likely to be betting on the Hess factor already. If the transaction gets delayed or blocked further, one can expect some readjustment.

Beyond the Big Oil Bets

As Chevron cuts jobs and balances new resources in Kazakhstan and the Gulf of Mexico, it also deals with uncertainty in Venezuela, where an operating license may be withdrawn. Exxon is increasing production in Guyana to 1.3 million barrels/day by 2027, greater than North Dakota’s Bakken Shale.

One Wrong Move = ETF Domino Effect

With activist investors watching Exxon and Chevron still under pressure to prove long-term growth, the arbitration’s outcome could drive major portfolio re-weightings, flows into specific funds or a rise in thematic oil and gas ETFs.

In short, this isn't just a battle over barrels, it's about which ETFs end up doing well and which might need a Band-Aid.

Final Thought

This Guyana brawl might be happening in a London arbitration chamber, but its aftershocks will be felt through world markets and ETF tickers. For investors, it’s time to look beyond the barrel and begin peering at the ticker tape.

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Photo: Shutterstock

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