Chevron has announced that it entered into a definitive agreement with global independent energy Hess Corp. to acquire its shares for $53 billion, or $171 per share based on Chevron’s closing price on October 20, 2023.
This deal sets as the second proposed mega-merger among the biggest U.S. oil players after Exxon Mobil bid $60 billion for Pioneer Natural Resources earlier this month.
The proposed deal raises the competition between Chevron, the No. 2 U.S. oil and gas producer behind Exxon, and it will make it an unusual partner with its bigger rival in Guyana, as Hess, along with China’s CNOOC, were working together to develop drilling in the nascent Latin American producer.
Additionally, Hess’ Bakken assets will further strengthen Chevron’s position in the U.S. shale market, complementing its existing operations in the DJ and Permian basins.
“This combination positions Chevron to strengthen our long-term performance and further enhance our advantaged portfolio by adding world-class assets,” said Chevron Chairman and CEO Mike Wirth. “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,” he added.
The addition of Hess is expected to increase Chevron’s estimated five-year production and free cash flow growth rates and expected to extend such growth into the next decade, according to Chevron’s press release.
Notably, John Hess is expected to join Chevron’s Board of Directors.
Post-closing of the transaction, Chevron intends to increase share repurchases by $2.5 billion to the top end of its guidance range of $20 billion per year in a continued upside oil price scenario.
Under the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. The total enterprise value, including debt, of the transaction is $60 billion.
Hess CEO John Hess expressed his satisfaction with the agreement, stating, “This strategic combination brings together two strong companies to create a premier integrated energy company. 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,” he continued.