Chevron To Buy Oil Producer Hess Corp For $53B
Chevron Corporation (NYSE: CVX), the American oil and gas giant, has struck a deal to buy rival Hess Corp (NYSE:…
Chevron Corporation (NYSE: CVX), the American oil and gas giant, has struck a deal to buy rival Hess Corp (NYSE: HES). Chevron will pay $53bn in stock for Hess Corp, a 10% premium to the company’s average market value over the past 20 days. It’ll also assume $7bn of Hess’s debt, placing the deal’s enterprise value at $60bn.
The American oil sector has been on fire lately. Two weeks ago, ExxonMobil agreed to buy natural gas producer Pioneer Natural Resources for $60bn in stock. It didn’t take long for the next megadeal to happen.
ExxonMobil and Chevron, the first and second-largest American oil producers by revenue, respectively, are deploying their record profits from a 2022 oil price surge to consolidate an industry facing long-term challenges.
Developed countries have increasingly soured on fossil fuels in favor of cleaner, renewable energy sources. However, demand for fossil fuels remains strong in the short term, even as governments focus on switching to renewable alternatives.
- ExxonMobil and Chevron are doubling down on fossil fuels for future growth, in contrast to their European counterparts, like the UK’s BP and France’s TotalEnergies, focusing more on renewable energy for future growth. Both American oil giants are keen on expanding domestic shale gas operations and exploring the newly found oil wells of Guyana.
Hess Corp is one of America’s leading independent oil and gas producers. It reported $11.6bn in sales in 2022, up 53% from the previous year, and a $2.1bn net profit, up nearly 4x from 2021.
Chevron reported a record net income of $35bn on $236bn in sales in 2022. The company’s stock is trading at higher levels than previous years, giving it ample currency for mega acquisitions.
- Hess Corp was founded in the 20th century by American businessman Leon Hess. Leon passed away in 1999, handing over to his son, John, who is currently Hess’s chief executive.
- John is the biggest individual shareholder in the oil company bearing his family’s name and will pocket a windfall by selling to Chevron.
Barring regulatory hurdles, Hess’s acquisition is expected to close in the first half of 2024.