Chevron has completed its $53bn acquisition of Hess after meeting all necessary closing conditions, including a favourable arbitration ruling on the latter’s offshore asset in Guyana.
According to Chevron, the merger strengthens its global energy portfolio by incorporating significant assets in key regions such as the US Bakken and Guyana.
The deal gives Chevron a 30% interest in Guyana’s Stabroek Block, which contains over 11 billion barrels of oil equivalent.
Last week, the US Federal Trade Commission (FTC) removed prior restrictions, allowing Hess CEO John Hess to join Chevron’s board of directors, pending board approval.
John Hess said: “We are proud of everyone at Hess for building one of the industry’s best growth portfolios including Guyana, the world’s largest oil discovery in the last 10 years, and the Bakken shale, where we are a leading oil and gas producer.
“The strategic combination of Chevron and Hess creates a premier energy company positioned for the future.”
As per the merger agreement signed in October 2023, Hess shareholders are set to receive 1.025 Chevron shares for each Hess share. Consequently, Chevron will issue around 301 million shares from its treasury to Hess shareholders.
Meanwhile, the 15.38 million Hess shares that Chevron owned were cancelled without compensation at closing.
Chevron foresees several advantages from the transaction, notably an expected increase in cash flow per share this year following the realisation of synergies and the commencement of a floating production storage and offloading vessel in Guyana. The merger is also projected to enhance Chevron’s production and free cash flow growth rates extending into the next decade.
The combined company anticipates its capital expenditure to range between $19bn and $22bn while aiming to maintain a double-digit Return on Capital Employed (ROCE) at mid-cycle prices. Furthermore, Chevron expects to achieve run-rate cost synergies of $1bn by the end of 2025.
Chevron chairman and CEO Mike Wirth said: “This merger of two great American companies brings together the best in the industry.
“The combination enhances and extends our growth profile well into the next decade, which we believe will drive greater long-term value to shareholders.”
