World News | Chevron Buys Hess for USD 53 Billion, 2nd Buyout Among Major Producers This Month as Oil Prices Surge
Get latest articles and stories on World at LatestLY. Chevron is buying Hess Corp. for USD 53 billion and it's not even the biggest acquisition in the energy sector this month as major producers seize the initiative while oil prices surge.
San Francisco, Oct 23 (AO) Chevron is buying Hess Corp. for USD 53 billion and it's not even the biggest acquisition in the energy sector this month as major producers seize the initiative while oil prices surge.
Crude prices rose sharply in early 2022 with Russia's invasion of Ukraine and are hovering around USD 90 per barrel after ticking another 9 per cent higher this year, meaning big drillers are flush with cash and looking for places to invest piles of cash.
The Chevron-Hess deal comes less than two weeks after Exxon Mobil said that it would acquire Pioneer Natural Resources for about USD 60 billion.
Upward pressure on oil prices are being applied from a number of fronts including the war in Ukraine. Oil markets are being stretched by cutbacks in oil production from Saudi Arabia and Russia, and now, a war between Israel and Hamas runs the risk of igniting a broader conflict in the Middle East.
While attacks on Israel do not disrupt global oil supply, according to an analysis by the US Energy Information Administration, “they raise the potential for oil supply disruptions and higher oil prices.”
Chevron said Monday that the acquisition of Hess adds a major oil field in Guyana as well as shale properties in the Bakken Formation in North Dakota.
Guyana is a South American country of 791,000 people that is poised to become the world's fourth-largest offshore oil producer, placing it ahead of Qatar, the United States, Mexico and Norway.
It has become a major producer in recent years with oil giants, including Exxon Mobil, China's CNOOC, and also Hess, squared off in a heated competition for highly lucrative oil fields in northern South America.
“This combination is aligned with our objective to safely deliver higher returns and lower carbon,” Chevron Chairman and CEO Mike Wirth said in prepared remarks.
“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.”
Chevron is paying for Hess with stock. Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. Including debt, Chevron valued the deal at USD 60 billion.
And even with alarms being raised over climate change after a summer of record-smashing temperatures, elevated energy prices have driven more exploration and more drilling, and big payouts for investors.
Last month Britain gave the go-ahead for a major oil and gas project in the North Sea, ignoring warnings from scientists and the United Nations that countries must stop developing new fossil fuel resources if the world is to avoid catastrophic climate change.
Chevron said the deal will help to increase the amount of cash given back to shareholders. The company anticipates that in January it will be able to recommend boosting its first-quarter dividend by 8 per cent to USD 1.63. This would still need board approval. The company also expects to increase stock buybacks by USD 2.5 billion to the top end of its guidance range of USD 20 billion per year once the transaction closes.
The boards of both Chevron and Hess have approved the deal announced Monday after six months of negotiations, and is targeted to close in the first half of next year. It still needs approval by Hess shareholders. John Hess, the company's CEO, is expected to join Chevron's board. His family owns a large chunk of Hess.
Shares of Chevron Corp., based in San, Ramon, California, declined more than 2 per cent before the opening bell Monday. Share of Hess Corp., based in New York City, rose slightly. (AP)
(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)