Chevron and ExxonMobil will compete in the oil-rich Guyana and US shale industries following the takeover.
Chevron, the second major American energy company to make a significant wager on the production of fossil fuels this month, has revealed plans to acquire the oil producer Hess Corporation for $53 billion (£44 billion).
Less than two weeks after Exxon Mobil, one of the biggest oil firms in the world, announced it would buy the shale group Pioneer Natural Resources for $59.5 billion, Chevron announced an all-stock transaction that will expand its foothold in oil-rich Guyana.
Expectations of more industry consolidation have increased as a result of these significant purchases. Chevron CEO Michael Wirth stated, “We’ve got too many CEOs per BOE [barrels of oil equivalent], so consolidation is natural.” He also said that the globe may expect to see other deals.
Following significant discoveries made by Exxon, its partner Hess, and China’s CNOOC—which collectively produce 400,000 barrels of petroleum per day from two offshore vessels and have stated they might develop up to ten offshore projects—Guyana has emerged as a major oil producer in recent years.
Chevron is paying $171 per share, or roughly 4.9% more than the stock’s most recent closing price, to acquire Hess. John Hess, the CEO of the smaller business, is anticipated to become a member of Chevron’s board of directors following the deal’s closing in the first half of 2024.
According to the firms, the merged business would grow output and free cash flow more quickly and for a longer period of time than Chevron’s present five-year estimate.
“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,” stated Pierre Breber, vice president and chief financial officer of the company.
Despite the Biden administration’s efforts to accelerate the transition to renewable energy in light of the climate issue, the US oil majors’ confidence that the output of fossil fuels won’t be severely impeded in the near future is demonstrated by this acquisition.
According to Wirth, “by adding world-class assets, this combination positions Chevron to strengthen our long-term performance and further enhance our advantaged portfolio.”
He asserted that the goals of both businesses are to “deliver higher returns and lower carbon.” However, opponents of such agreements have questioned how global climate targets will be met in light of oil industry consolidation.
The takeover was characterized as “yet another concerning sign that the fossil fuel industry has no intention of slowing down, despite increasingly dire warnings from climate scientists” by Cassidy DiPaola, campaign manager at Fossil Free Media.
The transaction has received unanimous approval from the boards of Hess and Chevron, but it still needs to pass regulatory review. Additionally, Hess’s shareholders must accept it.
Chevron’s stock fell 2.4% in early New York trading. Hess’s stock increased by 0.8%.