Chevron Corporation has agreed to purchase Hess Corporation for $53 billion in stock. The intention behind the acquisition appears to have been to grab 30 percent of an oil field owned by its rival Exxon Mobil in Guyana.
Hess CEO John Hess is expected to join Chevron’s board of directors. The stock was purchased at $171 per share based on Chevron’s closing price on Oct. 20. When one includes debt, the total enterprise value of the deal was $60 billion.
“Building on our track record of successful transactions, the addition of Hess is expected to extend further Chevron’s free cash flow growth,” said Chevron CFO Pierre Breber. “With greater confidence in projected long-term cash generation, Chevron intends to return more cash to shareholders with higher dividend per share growth and higher share repurchases.”
Through the deal, Chevron reported it would receive 30 percent ownership of the equivalent of more than 11 billion barrels of oil in resources in Guyana. It also said it would be getting 465,000 net acres of oil inventory and assets in the Gulf of Mexico, as well as a steady cash flow from Southeast Asia natural gas business.
We’ve entered into an agreement to acquire @HessCorporation. This acquisition would add world-class assets and people and is expected to enhance and extend our production and free cash flow growth into the 2030s. Read more and tune in to our webcast here: https://t.co/ONoKacdmCQ
— Chevron (@Chevron) October 23, 2023
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Chevron CEO Michael Wirth, who oversaw the deal, also saw to the acquisition of PDC Energy and Noble Energy. Chevron’s total oil and gas output is set to rise to 3.7 million barrels per day and expand Chevron’s shale output by 40 percent.
This follows a $60 billion deal made by Exxon Mobil to purchase shale driller Pioneer Natural Resources which went into effect two weeks ago. It was the largest oil and gas acquisition in the last 20 years.
These deals have surpassed Occidental Petroleum’s acquisition of Anadarko Petroleum for $38 billion in 2019 and Exxon’s $30 billion purchase of XTO Energy in 2010. While European rivals of Chevron and Exxon shift to renewable energy, the two oil giants have now spent $110 billion together in a move that will ensure years of additional oil output via American shale.
With its $436 billion market cap, Exxon is intending to advance on the West Texas shale industry, particularly its Permian Basin, as well as New Mexico which Exxon said is central to its growth strategy. The deal is projected to double Exxon’s Permian production to over 1.3 million barrels of oil equivalent per day, and both companies anticipate finalizing the transaction in the first half of 2024.
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