Chevron has completed its $55 billion acquisition of Hess after a lengthy legal dispute with Exxon over Hess’s 30% stake in Guyana’s highly promising Stabroek Block.
Why it matters: The Stabroek Block, holding over 11 billion barrels of oil, is one of the fastest-growing oil production regions worldwide. This acquisition significantly bolsters Chevron’s long-term growth prospects and addresses its pressing challenge of dwindling oil reserves.
The details:
- Exxon, the operator of the Guyana project with a 45% stake, challenged the merger through arbitration, citing a right of first refusal on Hess’s Guyana assets.
- The delay in closing the deal, originally targeted for mid-2024, caused Chevron to miss out on roughly 180,000 barrels per day of Hess oil and billions in gross sales and profit from the Stabroek Block in 2024.
- Chevron expects to realize $1 billion in run-rate cost synergies by the end of 2025 and will cut jobs due to overlapping roles between the two companies.
- During the arbitration, Chevron prepared for the integration of Hess business, purchasing $2.2 billion in Hess shares and issuing $5.5 billion in long-term debt.
What they’re saying:
- “The outcome’s not only good for Chevron, it’s also good for the entire industry,” said Mike Wirth, Chevron’s chief executive.
- An Exxon spokesman stated, “We welcome Chevron to the venture and look forward to continued industry-leading performance and value creation in Guyana for all parties involved.”
- “I guess now we know and can move on past this soap opera,” RBC Capital Markets analysts wrote.
- “For Chevron, this favorable ruling helps the major avoid other time-consuming (and likely costly) approaches for inorganic growth,” said Atul Raina, vice president at Rystad Energy.
The other side: Since announcing the Hess deal, Chevron shares have declined about 9%, while a competitor’s stock is up just over 1% since unveiling its Pioneer acquisition, reflecting investor sentiment around timing and execution.
What’s next: With the deal now closed, Chevron is expected to reduce its workforce by 15 to 20 percent, not including the employees from Hess, and provide more specific details about the workforce soon.