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Amid lower crude oil prices, U.S. oil stocks and oil-tracking exchange-traded funds (ETF) opened lower on Monday, and even Hess’s shares slid after Chevron’s announcement it would buy the smaller U.S. oil firm in an all-stock deal.
Hess Corporation (NYSE: HES) was down by 0.55% in pre-market trade, despite being the target of the Chevron acquisition, due to the all-stock nature of the announced transaction.
Chevron (NYSE: CVX) was down 2.6% pre-market, after announcing earlier today an agreement to 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 deal 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.
The muted reaction from the market to the Chevron-Hess deal was probably due to the fact that this is an all-stock transaction, too, analysts say.
Crude oil prices were also down early on Monday, further weighing on the oil stocks. Continued diplomatic talks gave traders hope the conflict in the Middle East might not escalate into a full-scale regional war.
The Energy Select Sector SPDR Fund (NYSEARCA: XLE) was down 0.95% pre-market, as were the stocks of some of the fund’s major constituents, including ExxonMobil, Occidental Petroleum, and Marathon Oil Corp.
The oil market will continue to follow closely the events in the Middle East, which could give direction to oil prices and oil stocks this week.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com