Chevron (NYSE:CVX) is planning to acquire Hess Corporation (NYSE:HES) in a $53 billion all-stock deal, which will significantly enhance its position in Guyana's shale oil regions and the Permian Basin. This move comes on the heels of Exxon (NYSE:XOM)'s $60 billion acquisition of Pioneer Natural Resources (NYSE:PXD), marking another significant consolidation in the U.S. energy sector.
The Chevron-Hess deal, anticipated to be finalized in the first half of 2024, is expected to diversify Chevron's portfolio amid high oil prices, currently above $87 per barrel. The total transaction, including debt, amounts to $60 billion.
Hess shareholders will receive 1.025 Chevron shares per Hess share, valued at $171 based on Hess's closing price. Following the announcement of the merger, pre-market trading saw Hess shares rise 2.13% to $166.49, while Chevron's dropped to $162.
InvestingPro's real-time metrics reveal that Chevron has a market cap of $311.51 billion and a P/E ratio of 10.51, while Hess's market cap stands at $49.84 billion with a P/E ratio of 33.8. This indicates that Chevron is trading at a lower earnings multiple compared to Hess, which aligns with one of the InvestingPro Tips that Hess is trading at a high earnings multiple.
The acquisition will give Chevron access to Hess's 30% stake in over 11 billion barrels of oil equivalent in Guyana's Stabroek offshore oil block. Additional assets include positions in the shale-rich Bakken basin and the Gulf of Thailand.
Mike Wirth, Chevron CEO, expressed confidence that the merger will boost the company's long-term performance. John Hess, post-acquisition, will join Chevron's board as the company expands into the deep waters of the Gulf of Mexico and South America.
InvestingPro Tips for both companies suggest they have been profitable over the last twelve months and have consistently increased their earnings per share. This could be a positive sign for investors as the merged entity might continue this trend.
This merger aligns with Chevron's larger strategy to navigate through the energy transition and enhance shareholder value. The acquisition is also expected to fortify its position in key oil-rich regions during a period of high global oil prices.
InvestingPro Tips also suggest that both Chevron and Hess have maintained their dividend payments for several years. This could mean that the combined entity may continue to provide consistent dividends to its shareholders, further enhancing its investment appeal.
For more detailed insights and professional tips, consider subscribing to InvestingPro which offers a plethora of additional tips and real-time metrics.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.