Cheveron buys out Hess including projects in Guyana

HOUSTON, CMC – Chevron today said it has agreed to buy Hess for US$53 billion in stock, the second proposed mega-merger among the biggest United States oil players after Exxon Mobil bid $60 billion for Pioneer Natural Resources earlier this month.

The proposed deal raises the competition between Chevron, the second major US oil and gas producer behind Exxon, putting it in direct competition with its bigger rival to develop drilling in Guyana.

Guyana has become a major oil producer following huge discoveries in recent years, turning it into one of Latin America and the Caribbean's most prominent producers, only surpassed by Brazil and Mexico.

The Caribbean Community (CARICOM) country has emerged as the world's fastest growing oil province following more than 11 billion barrels of oil and gas discoveries since 2015. Hess holds a 30 per cent stake in an Exxon-led consortium now pumping 380,000 barrels per day.

Their projects are expected to reach 1.2 million barrels per day of output by 2027.

The deal also signals Chevron's plans to continue boosting investments in fossil fuels as oil demand remains strong and big producers use acquisitions to replenish their inventory after years of under-investment.

“This combination is aligned with our objective to safely deliver higher returns and lower carbon,” Chevron chairman and CEO Mike Wirth said.

“In addition, Hess increases Chevron's estimated production and free cash flow growth rates over the next five years, and is expected to extend our growth profile into the next decade supporting our plans to increase our peer-leading dividend growth and share repurchases,” he added.

Chevron has offered 1.025 of its shares for each Hess share held, or $171 per share, implying a premium of about 4.9 per cent to the stock's last close. The total deal value is $60 billion, including debt.

Chevron's shares were trading three per cent lower premarket.

RBC analysts said they were surprised by the deal timing and had expected the company to bide its time after Exxon's mega deal for Pioneer.

Chevron said that following the completion of the deal it intends to increase its share repurchases programme by US$2.5 billion to the top of its US$20 billion annual range, in a sign of confidence in future energy prices and its cash generation.

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