Chevron has agreed a deal to take over US oil producer Hess Corporation in a $53bn all-stock transaction, it said today.
Hess is a leading shale oil producer in the US onshore, as well as being a major producer in the deepwater zones of the Gulf of Mexico. The company is also involved in multiple oil discoveries in Guyana within the offshore Stabroek block.
Chevron said that the acquisition of Hess will help it to upgrade and diversify its portfolio, noting that the Stabroek block is "an extraordinary asset with industry-leading cash margins and low carbon intensity that is expected to deliver production growth into the next decade". Chevron also noted that Hess's Bakken assets will add another leading US shale position to its own DJ and Permian Basin operations.
The enlarged company "is expected to grow production and free cash flow faster and for longer than Chevron's current five-year guidance," it added.
In Guyana, the deal brings to Chevron 30pc ownership of more than 11bn bl of oil equivalent in discovered recoverable resources. It will also gain 465,000 net acres of "high-quality, long-duration" inventory in the Bakken, along with midstream assets. The deal also adds to Chevron complementary Gulf of Mexico assets and free cash flow from Hess' southeast Asian natural gas business.
Following the deal, Chevron said the enlarged company's capital spending is expected to grow to $19bn-22bn, from an expected capex budget of $17bn for this year. The combined company will also achieve an estimated $1bn of cost savings through synergies within a year of the acquisition closing. Chevron also expects to achieve proceeds from asset sales of $10bn-15bn between the closing of the transaction and 2028.
Chevron expects in January to recommend an increase in its first quarter dividend of 8pc, along with an increase in its share buybacks of $2.5bn.
"This combination positions Chevron to strengthen our long-term performance and further enhance our advantaged portfolio by adding world-class assets," Chevron chief executive Mike Wirth said.
Hess chief executive John Hess — who is expected to join Chevron's board — said the strategic combination will "create a premier integrated energy company".
