Chevron’s $53 billion deal for Hess Supercharges Lower 48 portfolio opens door to Guyana’s Stabroek

Chevron Corp. agreed on Monday to seize Hess Corp. in a $53 billion all-stock transaction that supercharges the company’s Lower 48 and Gulf of Mexico portfolio and gives it access to rich discoveries offshore Guyana in the Stabroek Block.

The total value of the enterprise, including debt, is $60 billion. The deal almost matches the estimated value ExxonMobil announced the acquisition earlier this month of Permian Basin pure play Pioneer Natural Resources Co.

In addition to the Guyana portfolio, Chevron is adding assets in the Bakken Shale and strengthening its holdings in the Denver-Julesburg (DJ) and Permian Basin. The connection comes months later Chevron has agreed to buy PDC Energy Inc.lower 48 heavy, in trade worth $6.3 billion.

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“This combination means Chevron will strengthen our long-term performance and further expand our leveraged portfolio by adding world-class assets,” said CEO Mike Wirth. “Importantly, our two companies share similar values ​​and cultures, with a focus on operating safely and honestly, attracting and developing the best people, making positive contributions to our communities and delivering higher returns and lower carbon emissions.”

CFO Pierre Breber said the addition of Hess “is expected to further extend Chevron’s free cash flow growth. With more confidence in its planned long-term cash generation, Chevron intends to return more cash to shareholders with higher dividend growth per share and higher share buybacks.

The deal includes a 30% stake in Stabroek, where ExxonMobil led the discoveries and which it operates. Discoveries to date include more than 11 billion boe. Chevron would also gain entry to the Bakken, where Hess controls 465,000 net acres backed by integrated Hess Midstream assets.

Hess increased its production plan in July mainly due to “strong operating performance” this included substantial production from Guyana. Hess also estimates it has a 15-year inventory of wells in the Bakken to increase net production to 200,000 boe/d by 2025.

According to Chevron, the transaction would achieve operating cost synergies of approximately $1 billion within one year of closing. Combined capital expenditures are initially set at $19-22 billion per year, and Chevron plans to ramp up asset sales to generate up to $15 billion by 2028. After the closing, Chevron intends to increase share buybacks by $2.5 billion, up to $20 billion annually.

The $171/share deal is based on Chevron’s closing price last Friday (October 20), a 10.3% premium to its 20-day average. Once the transaction is completed, Chevron plans to issue 317 million shares of common stock.

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