24 October 2023

Chevron to acquire oil producer Hess in $53 billion deal

Chevron is set to take over oil producer Hess in a deal worth $53 billion. The deal follows a recent trend of consolidation in the US energy sector, exemplified by ExxonMobil's USD 59.5 billion acquisition of Pioneer Natural Resources earlier this month.

AM8MX4 lo

Chevron will pay $171 per Hess share, a premium of approximately 10% to the 20-day average price. Hess shareholders will receive 1.025 shares of Chevron stock for each share of Hess. A significant part of the agreement is that Chevron will acquire Hess' significant investment in Guyana's offshore waters. This project, in partnership with Exxon Mobil, is currently producing 400,000 barrels per day, a significant increase from zero production just four years ago. By 2027, production is expected to triple, making Guyana's share of total world oil production more than 1%. Exxon Mobil is spearheading the Guyana project as operator and major investor, and Hess is benefiting from what is gradually evolving into one of the most lucrative projects in the oil industry.

This transaction reflects ongoing consolidation in the energy sector, particularly in the United States, where smaller players are taking advantage of relatively high oil prices to merge with larger counterparts. It also highlights the bet by major US oil producers that global oil demand will be consistently high in the future, despite continued international pressure to reduce emissions and switch to renewable energy.

The acquisition of Hess is the latest in a series of sector-changing M&A deals. For example, Occidental Petroleum acquired Anadarko Petroleum four years ago in a $38 billion deal, and Pioneer has made significant acquisitions, including the purchase of Parsley Energy and DoublePoint Energy in 2021.