Chevron to acquire Hess Corporation for $53 billion

Chevron has disclosed its intentions to acquire the U.S. oil producer, Hess Corporation, in a deal valued at $53 billion, executed entirely in stock. Hess Corporation stands out as a premier shale oil producer onshore in the U.S. and is renowned for its substantial production activities in the Gulf of Mexico's deepwater zones. Additionally, Hess has been associated with multiple oil finds in Guyana, especially within the offshore Stabroek block.

Chevron has highlighted the strategic importance of this acquisition, emphasizing the potential of the Stabroek block. This particular asset boasts excellent cash margins and lower carbon intensity, promising steady production expansion into the upcoming decade. Another noteworthy addition to Chevron's portfolio from this acquisition is Hess's Bakken assets, complementing Chevron's existing DJ and Permian Basin operations.

The combined entity resulting from this acquisition is projected to surpass Chevron's current five-year production and free cash flow growth forecasts. This deal would grant Chevron a 30% stake in the Stabroek block, translating to over 11 billion barrels of oil equivalent in identified recoverable resources. Furthermore, Chevron is set to acquire 465,000 net acres of premium inventory in Bakken, supplemented by midstream assets. The deal will also enrich Chevron's offerings with Hess's complementary assets in the Gulf of Mexico and the robust cash flow from its southeast Asian natural gas ventures.

Post-acquisition, Chevron anticipates an increase in the company's capital expenditure to a range between $19 billion and $22 billion, up from the projected capex budget of $17 billion for the current year. The unified company aims to harness synergies to realize estimated cost savings of $1 billion within the first year post-acquisition. Asset sales are expected to yield between $10 billion and $15 billion from the transaction's closure till 2028.

In January, Chevron plans to propose an 8% increment in its Q1 dividend. This is in addition to a planned enhancement in its share buyback program by $2.5 billion.

Chevron's CEO, Mike Wirth, conveyed optimism about the acquisition, viewing it as a strategic move to bolster the company's long-term performance by integrating world-class assets. John Hess, the CEO of Hess Corporation, who is anticipated to be inducted into Chevron's board, echoed this sentiment, lauding the merger as a step towards creating a top-tier integrated energy enterprise.

According to the article by Procurement Resource, Chevron plans to acquire U.S. oil producer Hess Corporation in a $53 billion all-stock deal. Hess, known for its shale oil production and deepwater Gulf of Mexico activities, also has significant oil discoveries in Guyana. This strategic move aims to tap into Hess's assets, including the promising Stabroek block, offering strong cash margins and low carbon intensity. Chevron expects to achieve cost savings and significant resource growth, enhancing its position in the energy industry. The deal will increase Chevron's capital expenditure, and it plans to propose an 8% dividend increase in January.