Chevron, a prominent US oil firm, said that it has signed a binding agreement with fellow countryman Hess Corporation to buy all of the company's outstanding shares in an all-stock deal worth $53 billion
According to the terms of the deal, Hess stockholders will get 1.0250 Chevron shares for every Hess share. Chevron's equity is used to arrange the acquisition transaction as 100% stock. Upon consummation of the deal, Chevron will collectively issue approximately 317 million shares of common stock.
Net debt and the book value of non-controlling interest are included in the $60 billion total enterprise value. Based on closing stock prices on October 20, 2023, a 20-day average transaction price of $171 per share implies a 10.3% premium.
The boards of directors of both firms have unanimously authorized the deal, which is anticipated to completion in the first half of 2024. The consent of Hess shareholders is necessary for the transaction. Additionally, it is dependent on regulatory permissions and additional usual closing requirements. John Hess, the current CEO of Hess, is anticipated to join Chevron's board of directors after the acquisition is complete.
Chevron's already competitive portfolio is improved and diversified by the purchase of Hess. It is anticipated that the Stabroek block in Guyana will deliver production growth over the next ten years. Chevron's DJ and Permian basin operations are strengthened by Hess' Bakken assets and the country's energy security is further increased, as stated by Chevron.
Hess holds a 30% stake in Guyana's found recoverable resource of more than 11 billion barrels of oil equivalent, which provides good cash margins per barrel, a promising outlook for production growth, and significant exploration upside. Hess possesses 465,000 net acres of high-quality, long-duration inventory in the Bakken, which is backed by Hess Midstream's integrated assets. Hess also has complementary assets in the Gulf of Mexico and a consistent free cash flow from the natural gas market in Southeast Asia.
After the acquisition, which is anticipated to be finalized in the first half of 2024, Hess Corp. CEO John Hess will join Chevron's board of directors.
According to the firms, the combined company is anticipated to increase output and free cash flow faster and for a longer period of time than Chevron's present five-year estimate. Chevron's CFO Pierre Breber stated in a statement: "With greater confidence in projected long-term cash generation, Chevron intends to return more cash to shareholders through higher dividend per share growth and higher share repurchases."
Following a $60 billion bid from rival Exxon for Pioneer Natural Resources, which would have made it the largest producer in the largest U.S. oilfield, the deal was announced just a few weeks ago.
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