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Chevron buys Hess for $53 billion, 2nd buyout among major producers this month as oil prices surge

Oct 23, 2023, 6:13 AM | Updated: 6:14 am

FILE - A motorist drives near the pumps at a Chevron gas station in Oakland, Calif., on April 25, 2...

FILE - A motorist drives near the pumps at a Chevron gas station in Oakland, Calif., on April 25, 2017. Chevron is buying Hess Corp. for $53 billion as the biggest U.S. oil companies use a recent windfall in profits to buy up smaller competitors, Chevron said in a press release Monday, Oct. 23, 2023. (AP Photo/Ben Margot, File)
Credit: ASSOCIATED PRESS

(AP Photo/Ben Margot, File)

NEW YORK (AP) — Chevron is buying Hess Corp. for $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.

The Chevron-Hess deal comes less than two weeks after Exxon Mobil said that it would acquire Pioneer Natural Resources for about $60 billion.

Crude prices are up 9% this year and have been hovering around $90 per barrel for about two months. Energy prices spiked sharply immediately after Russia invaded Ukraine in early 2022.

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.

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 $60 billion.

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% to $1.63. This would still need board approval. The company also expects to increase stock buybacks by $2.5 billion to the top end of its guidance range of $20 billion per year once the transaction closes.

The deal arrives a month after unions ended disruptive strike actions at Chevron’s three liquefied natural gas plants in Australia that provide more than 5% of global LNG supplies.

The boards of both companies have approved the Hess deal, which 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 3% before the opening bell Monday. Shares of Hess Corp., based in New York City, rose slightly.

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Chevron buys Hess for $53 billion, 2nd buyout among major producers this month as oil prices surge