Chevron has completed its planned takeover of Hess following the arbitration ruling
Chevron has completed its planned takeover of US producer Hess after winning its arbitration against ExxonMobil over a stake in Guyana’s prolific Stabroek block.
Chevron announced its intention to take over Hess in October 2023, but its plans had been been on hold pending resolution of the arbitration that was decided in Chevron’s favour on Friday.
“This merger of two great American companies brings together the best in the industry,” Chevron chief executive Mike Wirth said on Friday.
“The combination enhances and extends our growth profile well into the next decade, which we believe will drive greater long-term value to shareholders,” he added.
Chevron’s planned $53 billion takeover of Hess was designed to include the smaller US producer’s 30% stake in the offshore block, but ExxonMobil, which operates the acreage with a 45% stake, launched arbitration proceedings last year, arguing it had the right of first refusal to value — and then potentially buy — Hess’ stake in the field.
Hess is a partner in the ExxonMobil-operated Stabroek block, where nearly 50 discoveries have been made to date, resulting in more than 11 billion barrels of oil equivalent in recoverable resources.
In addition to ExxonMobil, China’s CNOOC International, which holds a 25% stake in Stabroek, was also party to the arbitration that was heard by the International Chamber of Commerce (ICC) in Paris.
“We disagree with the ICC panel’s interpretation but respect the arbitration and dispute resolution process. As we’ve said before, ExxonMobil and CNOOC are aligned that we had a duty to ensure contract terms are always adhered to and not set a bad precedent for ourselves and industry,” ExxonMobil said on Friday.
After losing the arbitration ruling, ExxonMobil was magnanimous in defeat.
“We welcome Chevron to the venture and look forward to continued industry-leading performance and value creation in Guyana for all parties involved,” ExxonMobil said.
The Chevron-Hess combination creates a giant company with a 30% position in the Stabroek block as well as significant assets in the US Bakken and Permian basin shale plays, where Chevron is already a market leader.
The transaction includes assets in the US Gulf with 31,000 barrels of oil equivalent per day and natural gas assets in Southeast Asia with 57,000 thousand boepd, Chevron said on Friday.
Capital expenditure for the combined business this year is forecast at between $19 billion and $22 billion, while cost synergies are estimated at $1 billion by the end of the year.
“This accretive transaction is expected to drive significant free cash flow and production growth into the 2030s,” said Chevron chief financial officer Eimear Bonner.
“We are quickly integrating our two companies and expect to achieve $1 billion in annual run-rate cost synergies by the end of 2025. All of this should enable even higher returns to shareholders over the long-term.”
Hess has been contacted for comment.
The ruling is expected to buoy Chevron’s share price in the coming weeks following a period of uncertainty “as investors have more clarity on the investment case and can focus more on the free cash flow inflection into 2026-2027,” RBC Capital Markets said in a client note on Friday.