Chevron Buys Hess in Mega-Merger Deal

Chevron announced yesterday it is acquiring Hess in a $53 billion deal, the largest in the company’s history. These megadeals are transforming supermajors into oil and gas Megatrons through consolidation.

The details: People are calling this the second “mega-merger” of the month following ExxonMobil buying Pioneer a few weeks ago. With this purchase, Chevron’s production will increase by 10 percent, and will provide an opportunity for the company to diversify from its shale assets in the Permian Basin.

• This differs a bit from the Exxon-Pioneer deal where Exxon was looking to increase its stake in the Permian.

Who’s Hess? A US multinational oil and gas company with assets in the Bakken shale play, offshore oil in the Gulf of Mexico, and offshore gas in Malaysia. Though most enticing to Chevron is the joint venture Hess has in Guyana with ExxonMobil and CNOOC.

The little Guy(ana)

Chevron is looking to build its presence in Guyana, a major up-and-coming oil and gas producing country. The country has reserves of 11 billion barrels of oil, discovered in 2015 by Exxon and place it 17th in global oil reserves. 

• Oil production in Guyana started in 2020 and is expected to grow to 1.2 million barrels of oil per day by 2027. It’s considered one of the fastest growing economies in the world due to the oil discoveries.

Although Chevron has set net-zero goals, this latest deal shows it’s doubling down on oil and gas. Chevron CEO Mike Wirth said, “we live in the real world, and have to allocate capital to meet real world demands.”

Zoom out: This big deal is a big deal as it’s an indication that the oil and gas industry is alive and well, using mergers to consolidate. A trend that has been seen since the pandemic.