Chevron has agreed to buy Hess in a $53 billion, all-share deal as the American oil major doubles down on fossil fuels.
The acquisition is the second blockbuster oil and gas takeover this month, after ExxonMobil’s $60 billion acquisition of Pioneer, the fracking specialist.
The California-based Chevron said the deal would strengthen its long-term prospects by adding “world-class assets”, most notably the “extraordinary” Stabroek area off the coast of Guyana, the biggest oil discovery of the past decade. Hess has a 30 per cent stake in Exxon-operated fields estimated to hold the equivalent of more than 11 billion barrels of oil. Hess also has significant fracking assets in America’s Bakken shale region in North Dakota, as well as interests in the Gulf of Mexico and southeast Asia.
Mike Wirth, Chevron’s chief executive, insisted that the company believed “the future of energy is lower-carbon” and was “committed to helping to build a lower-carbon energy system”. However, he told CNBC: “We need to operate in the world that we live in and that is one that still needs oil and gas delivered by responsible producers.”
Mark van Baal, the founder of Follow This, an environmental activist shareholder movement, accused Chevron of “betting on the failure of the Paris climate agreement”, which requires fossil fuel usage to decline rapidly this decade.
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Chevron, valued at more than $300 billion, ranks behind Exxon as the second biggest international oil company that is not government-owned. It reported net income of $35.5 billion in 2022. Hess, which is valued at about $50 billion and reported $2 billion, was founded in 1933 by Leon Hess, who began delivering fuel oil from a lorry aged 19. His son, John Hess, has led the company since 1995 and the family remains its biggest shareholder with about a tenth of the stock. Hess, 69, is to join the Chevron board.
The deal is the second largest announced this year in any sector globally, according to London Stock Exchange analysts, and takes oil and gas mergers to $254 billion, the highest year-to-date total since 2014.
Biraj Borkhataria, an analyst at RBC Capital Markets, said there appeared to be “an increasing realisation” that oil and gas prices might remain high for some time, given a lack of investment.
While the Chevron-Hess takeover is an all-stock deal, analysts including RBC previously have noted the potential for more deals to come as companies sit on healthy cash balances thanks to the high prices of recent years.
However, Borkhataria suggested that European oil groups might be less able to carry out such deals since “US majors trade at a premium to most of the sector”. Weaker valuations for European companies made it “much more difficult to execute accretive M&A utilising equity”, he said, and there was a question over their “social licence to execute large-scale M&A”, given their emissions reduction targets.
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BP, valued at £90 billion, had been talked of as a potential takeover target for its largest American rivals. Its shares fell by 2.4 per cent, or 13¼p, to 532¼p, on Monday with that prospect appearing less likely now Exxon and Chevron are busy with such sizeable deals.
