Exxon’s partner sells out to Chevron for US$53B

Oct 24, 2023 ExxonMobil, News, Oil & Gas

…to control 30 % of Guyana’s oil resources in Stabroek Block

…Shareholders told to brace for increase in dividend, share repurchases

By Kiana Wilburg

Kaieteur News – Chevron Corporation, one of the world’s largest oil companies, announced on Monday that it will be buying out all the outstanding shares at Hess Corporation for US$53 billion, or $171 per share.

Under the terms of the agreement, Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. Taking this and other financial arrangements to follow, the full value of the transaction is US$60 billion.

Significantly, Chevron’s acquisition of Hess will give it exclusive control over a grand prize—30 percent of the working interest in Guyana’s Stabroek Block. In that deepwater block which stretches a massive 6.6 million acres, ExxonMobil is the operator with a 45 percent working interest while China National Offshore Oil Corporation (CNOOC) holds 25 percent.

Since oil production commenced in December 2019 at the Stabroek Block’s Liza Phase One Project, Exxon successfully started another, the Liza Phase Two, in February 2022. Both projects are producing about 400,000 barrels of oil per day. Exxon and partners are also targeting over 1.2 million barrels of oil by 2027, making Guyana’s Stabroek Block, one of the world’s fastest-ever oil development hotspots.

Hess Corporation CEO, John Hess

Hess’ Chief Executive Officer (CEO), John Hess is quoted on numerous occasions by this company, stating that the Stabroek Block has five government-approved projects, each of which will generate over US$1B in annual profits for his company.

Guyana’s Stabroek Block which is viewed as a premium profit-making machine for investors clearly caught the attention of Chevron as evidenced by remarks the company made on Monday.

Chevron dubbed the Stabroek Block as “an extraordinary asset with industry leading cash margins and low carbon intensity that is expected to deliver production growth into the next decade.”

Chevron also deemed Guyana’s Stabroek Block to be a priority asset which already has more than 11 billion barrels of oil equivalent discovered recoverable resource with high cash margins per barrel, strong production growth outlook and potential exploration upside.

Chevron’s Chairman and CEO, Mike Wirth

The massive oil producing company also indicated its high interest in the cash flow that will come following the start up of Payara, the third oil project set to come on stream by year end as well as Yellowtail, the fourth oil project scheduled to commence by 2025.

During a special conference call yesterday, Chevron’s Chairman and CEO, Mike Wirth praised Hess for its track record in the industry as well as bringing to the table the “most attractive, long-lived growth asset in Guyana” and a focused portfolio elsewhere that complements Chevron’s.

The CEO said, “The Stabroek Block in Guyana is world class with over 11 billion barrels of gross discovered recoverable resource from the industry’s largest oil discovery in the last decade. Hess’ share of net production is approximately 110 thousand barrels per day at industry-leading cash margins with low carbon intensity, a winning combination. And that’s just from the first two FPSOs (floating, production, storage and offloading vessels), with three more currently under development.”

Map showing Guyana’s Stabroek Block and key projects being developed.

The Chevron CEO also told his shareholders that there is potential for up to 10 FPSOs which is expected to drive production growth into the next decade. He was also pleased to share with investors that the Stabroek Block also holds additional exploration upside potential, with 10 to 12 wells planned for 2024. “Given past success, this bodes well for further resource growth,” he said.

During his remarks, Hess Corporation’s CEO, John Hess in usual fashion boasted of having the best growth portfolio in the industry with Guyana and the Bakken shale, where it is a leading oil and gas producer.

“…I believe our strategic combination creates a company that is stronger in every respect, with the leadership, asset portfolio and financial resources to deliver significant shareholder value for years to come,” the Hess chief said.

Combined, Chevron and Hess are expected to grow production and free cash flow faster and for longer than Chevron’s current five-year guidance. In addition, John Hess is expected to join Chevron’s Board of Directors.

As a result of this deal, Chevron said it intends to recommend an increase to its first quarter dividend per share of 8% to US$1.63, which will be subject to the approval of the Chevron Board of Directors.

It also plans to increase share repurchases by US$2.5 billion to the top end of its guidance range of US$20 billion per year in a continued upside oil price scenario.