Energy
Monday, October 23rd, 2023 2:14 pm EDT
Key Points
- Chevron’s $53 Billion Acquisition: Chevron has entered into an agreement to purchase Hess in a stock deal valued at $53 billion. This transaction is the second significant merger among major U.S. oil companies, following Exxon Mobil’s recent $60 billion bid for Pioneer Natural Resources.
- Competition and Expansion: This acquisition intensifies the competition between Chevron and Exxon, positioning Chevron as a major player in drilling in the emerging oil producer, Guyana. It highlights Chevron’s intention to expand its investments in fossil fuels, capitalizing on the robust demand for oil, and follows a trend of major producers using acquisitions to replenish their reserves after years of underinvestment.
- Deal Structure and Impact: Chevron is offering 1.025 of its shares for each Hess share, implying a premium of approximately 4.9% over Hess’s last closing stock price. The total deal value, including debt, amounts to $60 billion. The combined company is expected to achieve growth in production and free cash flow beyond Chevron’s existing five-year guidance. Furthermore, the acquisition signals Chevron’s confidence in future energy prices and cash generation, as it plans to increase its share repurchases program by $2.5 billion. Goldman Sachs advised Hess, while Morgan Stanley served as Chevron’s lead adviser in the deal.
Chevron has announced its agreement to acquire Hess in a stock deal worth $53 billion, marking the second major merger among leading U.S. oil companies following Exxon Mobil’s $60 billion bid for Pioneer Natural Resources earlier in the month. This move intensifies the competition between Chevron, the second-largest U.S. oil and gas producer, and Exxon, as they vie for drilling opportunities in emerging producer Guyana. The acquisition signifies Chevron’s commitment to increasing investments in fossil fuels, driven by strong oil demand and the need for major producers to replenish their reserves following years of underinvestment.
The deal involves Chevron offering 1.025 of its shares for each Hess share, equivalent to $171 per share, with a premium of approximately 4.9% over the stock’s last closing price. The total deal value, including debt, amounts to $60 billion. Notably, Chevron’s premarket shares were trading 3% lower, and analysts at RBC expressed surprise at the timing of the deal, as they had expected Chevron to take more time after Exxon’s significant acquisition of Pioneer.
Guyana has emerged as a significant oil producer following substantial discoveries in recent years, making it one of Latin America’s leading producers, behind only Brazil and Mexico. Exxon, along with partners Hess and China’s CNOOC, are currently the only active oil producers in the country, with projects projected to achieve 1.2 million barrels per day of output by 2027.
Upon the deal’s completion, it is expected that Hess Corp CEO John Hess will join Chevron’s board of directors, with the combined company anticipated to enhance production and free cash flow growth beyond Chevron’s existing five-year guidance. Additionally, Chevron plans to expand its share repurchases program by $2.5 billion, demonstrating confidence in future energy prices and cash generation. Goldman Sachs acted as the lead adviser to Hess, while Morgan Stanley served as the lead adviser to Chevron.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/10/23/chevron-to-buy-hess-corp-for-53-billion-in-all-stock-deal.html
