Chevron Corp (NYSE:CVX) has unveiled a substantial strategic move with the announcement of its acquisition of smaller competitor Hess Corp (NYSE:HES) in an all-stock deal worth $53 billion. This transaction is part of Chevron’s broader strategy to expand its presence in the lucrative oil reserves of Guyana.
This landmark deal sets the stage for two of the world’s premier oil giants, Chevron and Exxon Mobil (NYSE:XOM), to compete directly in two of the fastest-growing oil regions globally—shale and Guyana.
Guyana has risen as a significant oil producer following substantial discoveries by Exxon Mobil, its partner Hess, and China’s CNOOC (NYSE:CEO). Together, they currently produce 400,000 barrels per day from two offshore vessels and have plans to develop up to 10 additional offshore projects.
Chevron’s offer for Hess involves an exchange of $171 in Chevron stock for each Hess share, representing a premium of approximately 4.9% over Hess’s last closing share price.
Upon the deal’s completion, expected in the first half of 2024, Hess Corp’s CEO, John Hess, is anticipated to join Chevron’s board of directors.
The combined entity is projected to achieve increased production and free cash flow, surpassing Chevron’s existing five-year guidance.
Commenting on the acquisition, Chevron’s CFO Pierre Breber stated, “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.”
This acquisition follows closely on the heels of Exxon’s $60 billion proposal to acquire Pioneer Natural Resources (NYSE:PXD), which, if successful, would position Exxon as the largest producer in the largest U.S. oilfield.