Chevron, one of the world's leading energy companies, has made a significant acquisition in the oil industry. The company has successfully acquired Hess, a prominent US oil company, in a deal worth an impressive $53 billion.This strategic move by Chevron is set to have a profound impact on the global energy landscape. The acquisition of Hess will not only strengthen Chevron's position in the market but also expand its reach in the United States. With its extensive expertise and resources, Chevron is well-equipped to maximize the potential of this new venture.
US oil major Chevron announced has entered into a definitive agreement with compatriot Hess Corporation to acquire all outstanding shares of the company in an all-stock transaction valued at $53bn.
Acquisition Details
Under the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. The acquisition consideration is structured with 100% stock utilizing Chevron’s equity. In aggregate, upon closing of the transaction, Chevron will issue approximately 317m shares of common stock.
Total enterprise value of $60bn includes net debt and book value of non-controlling interest. The transaction price of $171 per share represents a premium of 10.3% on a 20-day average based on closing stock prices on October 20, 2023.
The transaction has been unanimously approved by the boards of directors of both companies and is expected to close in the first half of 2024. The acquisition is subject to Hess shareholder approval. It is also subject to regulatory approvals and other customary closing conditions. After the completion of the transaction, John Hess – the current CEO of Hess – is expected to join Chevron’s board of directors.
Benefits of the Acquisition
“The acquisition of Hess upgrades and diversifies Chevron’s already advantaged portfolio. The Stabroek block in Guyana is an extraordinary asset that is expected to deliver production growth into the next decade. Hess’ Bakken assets add another leading U.S. shale position to Chevron’s DJ and Permian basin operations and further strengthen domestic energy security,” Chevron explained.
In Guyana, Hess has a 30% ownership in more than 11bn barrels of oil equivalent discovered recoverable resource with high cash margins per barrel, strong production growth outlook, and potential exploration upside. In the Bakken, Hess owns 465,000 net acres of high-quality, long-duration inventory supported by the integrated assets of Hess Midstream while also having complementary Gulf of Mexico assets and steady free cash flow from the natural gas business in Southeast Asia.
Conclusion
Chevron added that it would recommend an increase to its first-quarter dividend per share of 8% to $1.63 in January. Post-closing, Chevron intends to increase share repurchases by $2.5bn to the top end of its guidance range of $20bn per year in a continued upside oil price scenario.
Furthermore, the combined company’s capital expenditures budget is expected to be between $19 and $22bn. With a stronger portfolio after closing, Chevron expects to increase asset sales and generate $10 to $15bn in before-tax proceeds through 2028. The transaction is also expected to achieve run-rate cost synergies of around $1bn before tax within a year of closing.
It is worth noting that this is the second major acquisition by oil majors in a matter of weeks. ExxonMobil announced the acquisition of Pioneer Natural Resources in an all-stock transaction worth $59.5bn earlier this month.
-Source(splash247)
