Chevron Corporation (NYSE: CVX) has successfully completed its acquisition of Hess Corporation (NYSE: HES), resulting in the formation of a premier integrated oil and gas company. The acquisition has added significant value to Chevron's portfolio, with the company now holding leading positions in critical energy markets globally.
One of the most notable additions to Chevron's assets is the acquisition of a 30% position in the Guyana Stabroek Block, which boasts over 11 billion barrels of oil equivalent discovered recoverable resource. Additionally, the acquisition includes 463 thousand net acres of high-quality inventory in the Bakken shale, along with complementary assets in the Gulf of America and natural gas assets in Southeast Asia.
Financially, the transaction is expected to drive substantial free cash flow and production growth into the 2030s, with the integration of the two companies projected to yield $1 billion in annual run-rate cost synergies by the end of 2025.
Under the terms of the merger agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share, resulting in Chevron issuing approximately 301 million shares of common stock to Hess stockholders.
The transaction is anticipated to be accretive to cash flow per share in 2025, following the realization of synergies and the start-up of the fourth floating production storage and offloading vessel in Guyana. Furthermore, it is expected to increase Chevron's estimated five-year production and free cash flow growth rates, extending such growth into the next decade.
Following the completion of the acquisition, Chevron plans to sustain a double-digit return on capital employed (ROCE) at mid-cycle prices, with a capital expenditures budget expected to range between $19 and $22 billion for the combined company. Additionally, the transaction is forecasted to achieve run-rate cost synergies of $1 billion by the end of 2025.
Chevron will provide updated long-term financial and operational information and guidance to reflect the acquisition of Hess at its investor day in New York City on November 12.
The successful completion of this acquisition positions Chevron as a formidable player in the global energy landscape, with an enhanced growth profile and a diversified portfolio that is expected to drive greater long-term value to its shareholders. As a result of these announcements, the company's shares have moved -0.89% on the market, and are now trading at a price of $150.04. Check out the company's full 8-K submission here.
