Oct 23 (Reuters) – Chevron ( CVX.N ) said on Monday it had agreed to buy Hess ( HES.N ) for $53 billion, the second proposed mega-merger among the biggest U.S. oil companies after Exxon Mobil ( XOM.N ). ) made a $60 billion bid for Pioneer Natural Resources earlier this month.
The proposed deal raises competition between Chevron, the No. 2 U.S. oil and gas producer behind Exxon, and makes it an unusual partner with its larger rival in Guyana, as Hess and China’s CNOOC work together to develop drilling. In the new Latin American producer.
The deal also signals Chevron’s plans to continue investments in fossil fuels as oil demand remains strong and major producers use acquisitions to replenish their inventories after years of underinvestment.
Chevron offered 1.025 of its shares, or $171 per share, for each Hess share, representing a premium of about 4.9% to the stock’s last close. The total contract value is $60 billion, including debt.
Shares of Chevron traded 3% lower premarket. RBC analysts said they were surprised by the deal timing and had expected the company to bide its time after Exxon’s mega deal for Pioneer ( PXD.N ).
Following huge discoveries in recent years, Guyana has become a major oil producer, making it one of the most important producers in Latin America, surpassed only by Brazil and Mexico.
Exxon and partners Hess and China’s CNOOC ( 0883.HK ) are the only oil producers operating in the country. Their plans are expected to reach production of 1.2 million barrels per day by 2027.
Hess Corp CEO John Hess is expected to join Chevron’s board of directors once the deal closes in the first half of 2024.
The combined company is expected to grow production and free cash flow faster and longer than Chevron’s current five-year guidance, the companies said.
Following the deal, Chevron said it intends to increase its share repurchase program by $2.5 billion, above its annual range of $20 billion, as a sign of confidence in future energy prices and its cash generation.
Goldman Sachs was the lead advisor to Hess, and Morgan Stanley was the lead advisor to Chevron.
Mrinalika Roy reports in Bangalore; Editing by Nivedita Bhattacharjee and Sriraj Kalluvila
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