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Chevron will buy Hess Corporation in an all-stock transaction valued at $53 billion in another mega deal in the oil industry that will give the U.S. supermajor exposure to Guyana’s large offshore oil reserves.
The all-stock transaction is valued at $171 per share based on Chevron’s closing price on October 20, 2023. The total enterprise value, including debt, of the transaction is $60 billion, Chevron said in a statement on Monday.
This is the second major deal in the U.S. oil industry announced this month. Earlier in October, ExxonMobil announced a deal to buy Pioneer Natural Resources in an all-stock transaction valued at $59.5 billion. The implied total enterprise value of the transaction, including net debt, is around $64.5 billion.
As part of the Chevron-Hess agreement, Hess CEO John Hess is expected to join Chevron’s Board of Directors.
The acquisition of Hess diversifies Chevron’s portfolio with assets offshore Guyana and in the U.S. Bakken shale play.
Guyana has become a hotspot for exploration and development in recent years after Exxon and Hess found more than 11 billion barrels of oil equivalent offshore the South American country. Exxon, leading a consortium with Hess, is currently producing all the crude oil in Guyana—the world’s newest oil-producing nation.
By buying Hess, Chevron will get 30% ownership in more than 11 billion barrels of oil equivalent discovered recoverable resource with high cash margins per barrel, strong production growth outlook, and potential exploration upside, Chevron said.
In addition, Chevron will have 465,000 net acres of high-quality, long-duration inventory in the Bakken supported by the integrated assets of Hess Midstream, complementary U.S. Gulf of Mexico assets, and steady free cash flow from its Southeast Asia natural gas business.
“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,” said Chevron’s CFO Pierre Breber.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.