Chevron said Monday it would purchase Hess Corporation for $53 billion, an all-stock transaction that solidifies U.S. oil majors' long-term reliance on fossil fuels amid sustained high prices and expected global demand.
Chevron will pay $171 per share to acquire Hess, or a 10% premium to the company's 20-day average stock price, according to a joint statement from the companies. Hess shareholders will receive 1.025 of Chevron shares for each Hess share, for a total value of $60 billion, including debt.
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The mega deal will help Chevron establish a foothold in Guyana, the South American country that has established itself in recent years as a new but prolific oil supplier. Guyana’s oil production is now the third-highest in the region, outpaced only by Brazil and Mexico. It is also on track to become the world's fourth-largest offshore oil producer.
“This combination is aligned with our objective to safely deliver higher returns and lower carbon,” Chevron Chairman and CEO Mike Wirth said on Monday, adding that the deal "positions Chevron to strengthen our long-term performance and further enhance our advantaged portfolio by adding world-class assets."
“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 said.
In acquiring Hess, Chevron will join Exxon and China's state-owned CNOOC, the only other active oil producers operating in Guyana.
Oil production in the small country has skyrocketed since 2019, when it had virtually no measurable oil output, according to the U.S. Energy Information Administration. It now produces 260,000 barrels per day, an amount the EIA estimates will rise to 480,000 bpd in 2024.
The projects are expected to produce a combined 1.2 million barrels of oil per day by 2027 and will increase Chevron's total oil and gas output by 10%.
Chevron’s acquisition of Hess comes just two weeks after Exxon Mobil announced its $60 billion buyout of shale giant Pioneer Natural Resources.
Together, the acquisitions represent a major bet from U.S. producers on the long-term future of oil and the role it will play in the global energy mix despite the record investments made by Western nations to scale up zero-emissions power sources and renewable energy, such as wind and solar.
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The deals also contrast with urgent warnings from the scientific community and the United Nations, which have said the world must accelerate its transition away from fossil fuels if it hopes to limit the planet from warming beyond 1.5 degrees Celsius, or 2.7 degrees Fahrenheit, compared to preindustrial levels.
“Fossil fuel industry transition plans must be transformation plans that chart a company’s move to clean energy — and away from a product incompatible with human survival,” U.N. Secretary-General Antonio Guterres said in June. “Otherwise, they are just proposals to become more efficient planet-wreckers.