Chevron and ExxonMobil to Work Together in Guyana's Oil Province

Chevron has acquired Hess Corporation, gaining a 30% stake in Guyana's Stabroek offshore block, where ExxonMobil is the operator with a 45% stake. The deal was finalized after a year-long arbitration battle initiated by Exxon, which strained the relationship between the two companies' top executives. Now, Exxon and Chevron must work together to boost production and profits from the block, which has over 11 billion barrels of oil equivalent discovered recoverable resource. The acquisition is seen as a sign of what's to come for Big Oil, as the industry looks to acquire smaller companies with prized assets amid lower exploration spending.

Chevron Corporation (CVX) has finalized its acquisition of Hess Corporation (HES), securing a 30% stake in Guyana's Stabroek offshore block, where ExxonMobil (XOM) operates with a 45% stake. The deal, which has been held up for nearly two years, was concluded after an arbitration panel rejected ExxonMobil's challenge [1]. ExxonMobil had claimed that it had first right to acquire Hess's valuable stake in the Stabroek block, but the panel ruled that these rights did not apply to a full company merger [1].

The arbitration decision has ended a long legal battle that had created uncertainty around one of the biggest oil deals in recent memory. ExxonMobil, while expressing disagreement with the outcome, stated that it respects the process and welcomes Chevron as a new partner [1]. This ruling clears the way for Chevron to become a major partner in Guyana's most productive oilfield and a formal collaborator with ExxonMobil [1].

The acquisition is seen as a significant move in the oil industry, where companies are looking to acquire smaller companies with prized assets amid lower exploration spending. Chevron's acquisition of Hess enhances its portfolio and growth profile, particularly in the Guyana region, which boasts over 11 billion barrels of recoverable oil [1]. The deal also adds complementary assets in the Bakken of North Dakota, the Gulf of Mexico, and Southeast Asia [2].

Chevron's new integration with Hess is expected to drive significant free cash flow and production growth into the 2030s [2]. The company plans to quickly integrate both companies, aiming to achieve $1 billion in annual cost synergies by the end of the year [2]. Chevron's legacy portfolio is also on pace to generate substantial free cash flow next year, even before considering the incremental impact of the Hess deal [2].

The acquisition is expected to increase Chevron's production and free cash flow growth rates over the next five years, putting Chevron in a stronger position to create shareholder value [2]. Chevron's high-yielding dividend, currently at 4.5%, is expected to continue growing, along with plans to buy back a meaningful amount of shares annually [2].

The acquisition of Hess is a strategic move for Chevron, positioning it as a top-tier integrated oil and gas company. As the industry looks to consolidate and acquire smaller companies with prized assets, Chevron's move is indicative of the trends shaping the future of Big Oil [2].

References:
[1] https://www.nasdaq.com/articles/chevron-seals-hess-deal-exxonmobils-guyana-challenge-fails
[2] https://finance.yahoo.com/news/chevron-emerges-victorious-big-oil-071500281.html