With its $53 billion acquisition of Hess Corp., Chevron is completing a major consolidation in the oil industry. This action comes after Exxon Mobil recently declared that it will purchase Pioneer Natural Resources for an estimated $60 billion. Large drillers now have more financial resources thanks to the spike in oil prices, which has been caused by causes like the conflict in Ukraine and output reductions from major oil-producing nations. This has prompted them to look for investment possibilities.
Significant assets included in Chevron’s acquisition of Hess include shale holdings in North Dakota’s Bakken Formation and a sizable oil well in Guyana. With the potential to rank among the top offshore oil producers in the world, Guyana is starting to make a significant impact in the offshore oil production industry. With this transaction, Chevron hopes to increase its rates of production and cash flow growth over the following five years.
Hess stockholders will get 1.0250 shares of Chevron for each Hess share as part of the stock execution of the deal. Chevron valued the deal at $60 billion, including debt. This consolidation is a reflection of broader changes in the energy industry, especially in the US shale areas, where large producers are trying to reduce costs and streamline operations.
The agreement has been authorized by the boards of Hess and Chevron. It is anticipated to conclude in the first half of next year, subject to shareholder approval for Hess. It is expected that Hess Corp. CEO John Hess will become a board member of Chevron.
