In yet another megadeal for the US energy sector, Chevron Corporation announced it would purchase Hess Corporation in an all-stock deal valued at $53 billion.
According to a statement from both companies, Chevron will pay $171 per share for Hess in the all-stock transaction. Hess shareholders will receive 1.025 shares of Chevron for each Hess share, giving the company a total enterprise value of $60 billion, including debt. The $171 a share is a 10% premium versus Friday's close.
"The acquisition of Hess upgrades and diversifies Chevron's already advantaged portfolio," Chevron wrote in a statement, adding the deal will be a big boost to its operations:
- The Stabroek block in Guyana is an extraordinary asset with industry-leading cash margins and low carbon intensity that is expected to deliver production growth into the next decade.
- Hess' Bakken assets add another leading US shale position to Chevron's DJ and Permian basin operations and further strengthen domestic energy security.
- The combined company is expected to grow production and free cash flow faster and for longer than Chevron's current five-year guidance.
This is the second megadeal in the US oil/gas sector this month: Exxon Mobil Corp. agreed to buy Pioneer Natural Resources in an all-stock transaction valued at $59.5 billion, or $253 per share, based on ExxonMobil's closing stock price on Oct. 5. Its Exxon's largest takeover in more than two decades will make it a dominant producer of shale oil - as well as being extraordinary transformational for the US energy sector that might unleash another shale revolution.
Chevron Chairman and CEO Mike Wirth explained the importance of the Hess deal:
"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."
"Building on our track record of successful transactions, the addition of Hess is expected to extend further Chevron's free cash flow growth," said Pierre Breber, Chevron's CFO, adding, "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."
CEO John Hess, who is expected to join Chevron's Board of Directors, said, "This strategic combination brings together two strong companies to create a premier integrated energy company."
Chevron shares traded down by more than 3% on the news, while Hess shares were up about 1%.
"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," Chevron concluded in the statement.
Morgan Stanley & Co. is the lead financial advisor for Chevron. As for Hess, Goldman Sachs & Co. is the lead financial advisor.
Wall Street applauds these megadeals in the US oil/gas sector. These deals suggest fossil fuels are not going anywhere in the next decade; otherwise, these deals would not have even been proposed.
