Chevron Corp. said Monday that it’s reached a deal to buy Hess Corp. in an all-stock agreement valued at $53 billion, or $171 per share.
Chevron
CVX,
called Hess’s
HES,
Stabroek block in Guyana an “extraordinary asset,” and said Hess’s Bakke assets would give it another U.S. shale position. The energy giant expects the combined company will grow production and free cash flow faster than what’s baked into Chevron’s current five-year guidance.
Under the terms of the deal, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share, with a total enterprise value, including debt, of $60 billion. Hess Chief Executive John Hess is expected to join Chevron’s board of the directors.
Based on Friday’s closing prices, the deal terms valued Hess shares at $171.00, or a 4.9% premium.
Shares of Hess climbed 1.8% toward a record close in morning trading. In contrast, Chevron shares dropped 2.5%, enough to pace the Dow Jones Industrial Average’s
DJIA
decliners. At current prices, the deal terms would only imply a 2.3% premium.
Meanwhile, the Dow dropped 75 points, or 0.2%, while crude oil futures
CL.1,
shed 1.2%.
Citi analyst Alastair Syme said the Chevron-Hess deal might not have the “zing” of the previous all-stock oil industry deals, given the “modest” equity premium and the context that Hess’ stock was already at record-high levels.
Syme noted, however, that Hess as much of its value ahead of it given the growth in the Guyana oil fields, which is the core of Hess.
“Some have argued that Chevron is short long-term resource and optionality in the 2030s and saw M&A [merger and acquisition] as a necessary fix,” Syme wrote in a note to clients. “We see this deal more about the opportunity to high-grade the portfolio.”
Earlier in October, Exxon Mobil Corp.
XOM,
announced plans to purchase Pioneer Natural Resources
PXD,
for $59.5 billion in another all-stock deal. That marked the biggest deal announcement of 2023, which has been lackluster on the merger front.
