Exxon Mobil and Chevron ‘s fight over lucrative offshore oil assets in Guyana could ultimately determine which of the two stocks end up on top this year, said Kevin Holt, senior portfolio manager of the Invesco Energy Fund (FSTEX). The U.S. oil majors have bounced back in 2024 as worries about a recession and weak oil demand that dragged the energy sector lower last year have not materialized. Exxon, however, has significantly outpaced Chevron this year, with the oil majors’ stocks gaining roughly 15% and 6%, respectively. Exxon hit an all-time high during the oil rally in April and has outperformed the energy sector and the broader market, while Chevron has lagged behind. Chevron’s performance in the second half of the year could depend on the outcome of its feud with Exxon over an offshore oil development in Guyana called the Stabroek Block. Exxon leads that development with a 45% stake, but Chevron is seeking to get in on the action through its pending acquisition of Hess Corp , which has 30% stake in Stabroek. Hess shareholders approved the Chevron merger on Tuesday, but its unclear when the deal will close. Exxon is acting as a spoiler , hauling Chevron and Hess before an arbitration court to defend its claims to a right of first refusal over Hess’ Guyana assets under a joint operating agreement. “We’re waiting on the arbitration to see to see what happens in terms of right of first refusal,” said Holt. Exxon and Chevron are the fund’s top two holdings , representing 9.73% and 9.27% of total assets in FSTEX as of April 30. “If Chevron and Hess win the arbitration, I think Chevron will outperform Exxon in the second half of the year, assuming that you get a ruling in the second half of the year,” Holt said. “If Exxon wins the arbitration, I would probably see Exxon outperforming marginally but it’s already outperformed.” Exxon vs. Chevron Chevron came into the year facing production issues in the Permian Basin and cost overruns at its Tengiz project in Kazakhstan that frustrated investors, Holt said. Exxon, the other hand, hasn’t really faced any execution issues this year, the fund manager said. Exxon’s performance is a reversal from the decade leading up to the Covid-19 pandemic, when the company underperformed Chevron due to its capital expenditures during a period when oil prices were low, according to Holt. Since 2020, Exxon’s stock has come up from behind and outperformed Chevron as the company has implemented capital discipline, the fund…
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