Chevron to buy oil and gas producer Hess Corp in $53bn all-stock deal

Chevron has announced it will buy the US fossil fuel producer Hess Corporation in a $53bn (£44bn) all-stock deal, as it seeks to increase its presence in oil-rich Guyana.

The announcement comes less than two weeks after another of the world’s largest oil companies, Exxon Mobil, said it would acquire the shale group Pioneer Natural Resources for $59.5bn.

The two vast bets on the future of fossil fuel production have raised expectations of further consolidation across the industry. “We’ve got too many CEOs per BOE [barrels of oil equivalent] so consolidation is natural,” said Michael Wirth, chief executive of Chevron, who added that the world could expect to see other deals.

Guyana has become a leading oil producer in recent years after huge discoveries by Exxon, its partner Hess and China’s CNOOC, which together produce 400,000 barrels a day of crude from two offshore vessels and have said they could develop up to 10 offshore projects.

To buy Hess, Chevron is offering $171 a share, a premium of about 4.9% on the stock’s last closing price. The smaller company’s chief executive, John Hess, is expected to join Chevron’s board of directors once the deal is closed in the first half of 2024.

The combined company was expected to grow production and free cash flow faster and for longer than Chevron’s current five-year guidance, the companies said.

Chevron’s vice-president and chief financial officer, Pierre Breber, said “With greater confidence in projected long-term cash generation, Chevron intends to return more cash to shareholders with higher dividend per share growth and higher share repurchases.”

While the Biden administration has sought to hasten the shift towards renewable energy in the face of the climate crisis, this acquisition underlines the confidence of US oil giants that fossil fuel output will not be significantly hampered in the coming years.

Wirth said: “This combination positions Chevron to strengthen our long-term performance and further enhance our advantaged portfolio by adding world-class assets.”

Both companies are focused on “delivering higher returns and lower carbon,” he claimed. But campaigners have criticized such deals, questioning how consolidation in the oil industry will help the world to achieve climate targets.

Reuters contributed to this article.

Photograph: Richard Drew/AP - Chevron and Hess said the combined company would grow production and free cash flow faster and for longer.