HOUSTON, May 16 (Reuters) - Hess shareholders

should vote in favor of Chevron's ( CVX ) $53 billion all-stock

offer at the oil company's May 28 special meeting, proxy adviser

Glass Lewis said on Thursday.

The proposed deal terms provide a reasonable valuation and

offer the potential for upside to Hess shareholders, while the

strategic and financial merits of the proposed merger "are sound

and reasonable, on balance," Glass Lewis said.

No. 2 U.S. oil producer Chevron ( CVX ) last October offered to

acquire rival Hess in a move to gain a foothold in oil-rich

Guyana's lucrative offshore fields, where Hess holds a 30% stake

in a joint venture.

Hess' partners in Guyana, Exxon Mobil ( XOM ) and China's

CNOOC, in March filed an arbitration case claiming a

right of first refusal over Hess's Guyana assets. The

arbitration has stalled the sale and surprised Chevron ( CVX ).

While the outcome of the arbitration is unclear, there is no

guarantee Exxon and CNOOC would exercise preemption rights to

Hess's stake in Guyana's giant Stabroek offshore field if they

win their case, Glass Lewis said.

Exxon has said it would evaluate its options depending on

the arbitration panel's decision, but would not rule out

acquiring Hess's stake in the block.

Chevron ( CVX ) could walk away from the purchase agreement without

paying any compensation to Hess shareholders if Exxon and CNOOC

win their arbitration case, Glass Lewis said.

GIANT OIL FIELD

The Exxon, Hess and CNOOC joint venture has discovered more

than 11 billion barrels of recoverable oil at Stabroek since

2015. The group has said it could install up to 10 production

vessels this decade to expand production.

The Stabroek consortium is pumping about 650,000 barrels per

day (bpd) and aims to reach 1.2 million bpd by 2027.

The Exxon-led group oversees all oil production in the

country. But Guyana is in talks with a Petronas, TotalEnergies

and QatarEnergy consortium over drilling in a separate

block.

Exxon operates the Stabroek block and owns a 45% share,

while Hess holds a 30% stake and CNOOC 25%.

A decision on the arbitration between the companies might

not be reached this year, Exxon has said. Chevron's ( CVX ) bid also is

pending regulatory approval by the U.S. Federal Trade

Commission.

Proxy advisory firms have split recommendations. Top U.S.

adviser Institutional Shareholder Services on Monday urged

shareholders to abstain from voting on the deal and to allow

more time for details on the arbitration process with Exxon to

emerge.

Pensions & Investment Research Consultants, a London-based

advisory firm, issued an opinion in favor of the combination.