- Chevron stock (NYSE:CVX) is in the red after its US$53 billion dilutive all-stock acquisition of Hess Corp. (NYSE:HES)
- Hess is a global independent energy company exploring for and producing crude oil and natural gas in Guyana, North Dakota, the Gulf of Mexico and the Gulf of Thailand
- Chevron is a major integrated energy company focused on crude oil, natural gas and renewable fuels
- Chevron stock (NYSE:CVX) is down by 2.84 per cent trading at US$162.10 per share
Chevron stock (NYSE:CVX) is in the red after its US$53 billion dilutive all-stock acquisition of Hess Corp. (NYSE:HES).
Hess is a global independent energy company exploring for and producing crude oil and natural gas in Guyana, North Dakota, the Gulf of Mexico and the Gulf of Thailand. The company generated more than US$2 billion in profit from more than US$11 billion in revenue in 2022.
Consideration represents a 10.3 per cent premium based on the 20-day average of Hess’ closing stock price ending on Oct. 20. The total enterprise value of the deal, including debt, is US$60 billion.
Chevron believes the acquisition is accretive to shareholder value by way of upgrading and diversifying its assets, as highlighted by the Stabroek block in Guyana, whose industry-leading cash margins and low-carbon intensity are expected to deliver production growth into the 2030s. Hess’ assets in North Dakota’s Bakken shale play also complement Chevron’s DJ and Permian basin operations.
Key acquisition benefits
- 30 per cent ownership in a more than 11 billion barrels of oil equivalent discovered recoverable resource in Guyana with high cash margins per barrel, a strong production growth outlook and potential exploration upside
- 465,000 net acres of high-quality, long-duration inventory in North Dakota
- Run-rate cost synergies of approximately US$1 billion before tax within 12 months of closing
- Chevron expects the acquisition to grow production and free cash flow “faster and for longer than current five-year guidance,” according to a statement released Monday, leading to more cash in shareholders’ pockets through higher dividend growth and increased share repurchases
- In January, Chevron intends to increase its dividend per share by 8 per cent to US$1.63, subject to board approval
- Post closing, Chevron intends to increase share repurchases by US$2.5 billion
“This combination positions Chevron to strengthen our long-term performance and further enhance our advantaged portfolio by adding world-class assets,” Mike Wirth, Chevron’s chairman and CEO, said in the statement. “Importantly, our two companies have similar values and cultures, with a focus on operating safely and with integrity, attracting and developing the best people, making positive contributions to our communities and delivering higher returns and lower carbon.”
“This strategic combination brings together two strong companies to create a premier integrated energy company,” added John Hess, Hess Corp.’s CEO and a future member of Chevron’s board. “I am proud of our people and what we have achieved as a company, which has one of the industry’s best growth portfolios including Guyana, the world’s largest oil discovery in the last 10 years, and the Bakken shale, where we are a leading oil and gas producer. Chevron has a world-class diversified portfolio of assets and one of the industry’s strongest balance sheets and cash return profiles. 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 significant shareholder value for years to come.”
The transaction is expected to close in the first half of 2024 contingent on Hess Corp. shareholder approval.
Chevron’s acquisition of Hess follows some other high-profile and pricey deals in the oil and gas industry earlier this month, such as ExxonMobil’s merger with Pioneer Natural Resources worth US$64.5 billion and Suncor Energy’s purchase of TotalEnergies’ interest in the Canadian oil sands for C$1.468 billion.
Chevron is a major integrated energy company producing crude oil and natural gas; manufacturing transportation fuels, lubricants, petrochemicals and additives; and developing emerging technologies for renewable fuels, hydrogen, carbon capture and carbon offsets.
Chevron stock (NYSE:CVX) is down by 2.84 per cent trading at US$162.10 per share as of 10:35 am ET. The stock is up by 6.3 per cent YoY, and has added over 45 per cent over the past five years.
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