Chevron to acquire Hess for USD53 billion in all-stock deal
Chevron Corporation is set to acquire Hess Corporation in a deal valued at USD53 billion. This all-stock transaction, including the assumed debt, brings the total enterprise value to USD60 billion. Hess shareholders will receive 1.0250 Chevron shares for each Hess share.
The Chevron deal follows an earlier announcement by another U.S.-based global energy major, ExxonMobil, to acquire Pioneer Natural Resources in an all-stock transaction valued at USD59.5 billion.
The agreement between Chevron and Hess is poised to enhance and diversify Chevron’s energy portfolio significantly. With a strategic addition of the Stabroek block in Guyana, this acquisition underscores Chevron’s commitment to innovation and sustainable growth.
Guyana, located in the northeastern part of South America, and home to more than 11 billion barrels of oil equivalent discovered recoverable resource, plays a pivotal role in this merger. The 30% ownership in this resource boasts high cash margins per barrel and a robust production growth outlook.
Meanwhile, the Bakken assets, spanning 465,000 net acres, are supported by Hess Midstream’s integrated assets. The Bakken Formation is one of the largest contiguous deposits of oil and natural gas in the United States. It stretches across parts of Montana, North Dakota, and the Canadian provinces of Saskatchewan and Manitoba. The core of its activity is primarily in western North Dakota. Hess has been a major player in the Bakken shale play.
“The merger underscores our commitment to bolstering long-term performance through strategic asset integration,” said Mike Wirth, Chevron’s chairman and CEO. The union of Chevron and Hess combines not just resources but shared values, emphasising safety, integrity, and community contribution.
The Stabroek block is a jewel in the crown of Hess’s holdings, promising lucrative returns and low-carbon footprint. Meanwhile, Hess’ Bakken assets will complement Chevron’s existing operations in the Denver-Julesburg Basin (DJ Basin), which is primarily located in northeastern Colorado, stretching into parts of southeastern Wyoming, western Nebraska, and western Kansas, and the Permian basins, which spans a large portion of West Texas and a section of southeastern New Mexico.
This acquisition is expected to accelerate Chevron’s cash flow and production growth beyond current projections. John Hess, CEO of Hess, praised the merger as a convergence of two robust energy entities, with Hess’ significant discoveries in Guyana and the Bakken shale enhancing Chevron’s diversified asset portfolio.
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. The acquisition is subject to Hess shareholder approval. It is also subject to regulatory approvals and other customary closing conditions.
The transaction price represents a premium of 10.3% on a 20-day average based on closing stock prices on October 20, 2023.
Advisors
Morgan Stanley & Co. LLC is acting as lead financial advisor to Chevron. Evercore also advised Chevron. Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal advisor to Chevron. Goldman Sachs & Co. LLC is acting as lead financial advisor to Hess. J.P. Morgan Securities LLC also advised Hess. Wachtell, Lipton, Rosen & Katz is acting as legal advisor to Hess.
Post-closing, Chevron intends to increase share repurchases by USD2.5 billion to the top end of its guidance range of USD20 billion per year in a continued upside oil price scenario.
