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Chevron will diversify its cash flow and oil assets by acquiring Hess and its associated resource projects.
Chevron Corporation has announced the signing of a definitive agreement with Hess Corporation to acquire the entirety of Hess’ outstanding shares in an all-stock transaction valued at $53 billion, or $171 per share based on Chevron’s closing price on Oct. 20, 2023. According to the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron per Hess share. The enterprise value of the transaction, factoring in debt, is $60 billion.
“This strategic combination brings together two companies to create an integrated energy company,” said John Hess, CEO of Hess Corporation. “I believe our strategic combination creates a company that is stronger in every respect, with the leadership, asset portfolio and financial resources to lead us through the energy transition and deliver shareholder value for years to come.”
Chevron will absorb Hess’ Starbroek block in Guyana—an oil asset with positive cash margins and low carbon intensity that’s expected to deliver production growth past 2030. In addition, Hess’ Bakken assets will join Chevron’s DJ and Permian basin operations as a facet of the company’s U.S. shale portfolio.
The combined companies are projected to increase oil production and open up cash flow with more efficiency than Chevron’s previous five-year guidance agreement. John Hess will join the Chevron board of directors as part of the acquisition.
The acquisition of Hess provides Chevron with Guyana, Bakken, and Gulf of Mexico assets and associated cash flow. In Guyana, Chevron takes 30% ownership of more than 11 billion barrels of oil equivalent with upside for potential exploration. The Bakken assets add 465,000 net acres of long-duration inventory supported by the Hess midstream infrastructure. Cash flow from Hess’ southeast Asia natural gas business has been acquired as well.
Chevron expects the deal to extend growth into the next decade and increase the cash returned to shareholders by January of 2024. The transaction has been approved by the board of directors at both companies and is expected to close in the first half of 2024. Hess shareholder approval, regulatory approvals, and closing conditions are currently pending in the acquisition.
“Building on our track record of transactions, the addition of Hess is expected to extend further Chevron’s free cash flow growth,” said Pierre Breber, Chevron’s CFO. “With projected long-term cash generation, Chevron intends to return more cash to shareholders with higher dividend per share growth and higher share repurchases.”