Chevron has agreed to acquire rival American publicly listed oil and gas company Hess in an all-stock deal worth $53bn in a move to upgrade and diversify its portfolio.
After the inclusion of Hess’ debt, the total enterprise value is $60bn.
As per the terms of the deal, Hess’ shareholders will exchange each of their shares in the company for 1.025 shares of Chevron.
Based on the closing price of Chevron on 20 October 2023, the deal values each share of Hess at $171.
The acquisition will grant Chevron a 30% stake in Guyana’s offshore Stabroek block. Presently, the block is estimated to hold over 11 billion barrels of oil equivalent, with the potential for exploration of several billion additional barrels.
In the Bakken shale play in North Dakota, Chevron will expand its holdings with the addition of 465,000 net acres of long-duration inventory, which will be further strengthened by the integrated assets of Hess Midstream.
Additionally, Chevron will acquire complementary assets in the Gulf of Mexico and benefit from a consistent stream of free cash flow originating from Hess’ Southeast Asia natural gas business.
Chevron chairman and CEO Mike Wirth said: “This combination positions Chevron to strengthen our long-term performance and further enhance our advantaged portfolio by adding world-class assets.
“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.”
The merged entity is projected to achieve faster and more sustained growth in production and free cash flow when compared to Chevron’s existing five-year guidance. Furthermore, it is anticipated that John Hess, the CEO of Hess, will become a member of Chevron’s board of directors.
John Hess said: “This strategic combination brings together two strong companies to create a premier integrated energy company.
“I am proud of our people and what we have achieved as a company, which has one of the industry’s best growth portfolios including Guyana, the world’s largest oil discovery in the last 10 years, and the Bakken shale, where we are a leading oil and gas producer.
“Chevron has a world-class diversified portfolio of assets and one of the industry’s strongest balance sheets and cash return profiles.”
The transaction has received unanimous approval from the boards of directors of both companies and is anticipated to be finalised in the first half of 2024. It is contingent on approval from Hess’ shareholders and is also subject to regulatory clearances and customary closing conditions.
Morgan Stanley & Co. is serving as Chevron’s primary financial advisor, with additional advisory support from Evercore. Legal counsel for Chevron is being provided by Paul, Weiss, Rifkind, Wharton & Garrison.
For Hess, Goldman Sachs & Co. is the lead financial advisor, and advisory services are being offered by J.P. Morgan Securities. Legal guidance for Hess is being provided by Wachtell, Lipton, Rosen & Katz.
Chevron’s deal to acquire Hess is the second major agreement announced in the industry this month after ExxonMobil’s $59.5bn deal to buy American upstream company Pioneer Natural Resources.
