- World class assets and people strengthen long-term
outlook
- Cash flow per share accretion supports higher distributions
to shareholders
- Enhances and extends production and free cash flow growth
outlook into 2030s
- John Hess, Hess CEO, expected to join Chevron Board of
Directors
Chevron Corporation (NYSE: CVX) announced today that it has
entered into a definitive agreement with Hess Corporation (NYSE:
HES) to acquire all of the outstanding shares of Hess in an
all-stock transaction valued at $53 billion, or $171 per share
based on Chevron’s closing price on October 20, 2023. Under the
terms of the agreement, Hess shareholders will receive 1.0250
shares of Chevron for each Hess share. The total enterprise value,
including debt, of the transaction is $60 billion.
The acquisition of Hess upgrades and diversifies Chevron’s
already advantaged portfolio. The Stabroek block in Guyana is an
extraordinary asset with industry leading cash margins and low
carbon intensity that is expected to deliver production growth into
the next decade. Hess’ Bakken assets add another leading U.S. shale
position to Chevron’s DJ and Permian basin operations and further
strengthen domestic energy security. The combined company is
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.
“This combination positions Chevron to strengthen our long-term
performance and further enhance our advantaged portfolio by adding
world-class assets,” said Chevron Chairman and CEO Mike Wirth.
“Importantly, our two companies have similar values and cultures,
with a focus on operating safely and with integrity, attracting and
developing the best people, making positive contributions to our
communities and delivering higher returns and lower carbon.”
“Building on our track record of successful transactions, the
addition of Hess is expected to extend further Chevron’s free cash
flow growth,” said Pierre Breber, Chevron’s CFO. “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.”
“This strategic combination brings together two strong companies
to create a premier integrated energy company,” CEO John Hess said.
“I am proud of our people and what we have achieved as a company,
which has one of the industry’s best growth portfolios including
Guyana, the world’s largest oil discovery in the last 10 years, and
the Bakken shale, where we are a leading oil and gas producer.
Chevron has a world-class diversified portfolio of assets and one
of the industry’s strongest balance sheets and cash return
profiles. I believe our strategic combination creates a company
that is stronger in every respect, with the leadership, asset
portfolio and financial resources to lead us through the energy
transition and deliver significant shareholder value for years to
come.”
Transaction Benefits
- Strong strategic fit:
- Guyana – 30% ownership in 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.
- Bakken – 465,000 net acres of high-quality, long-duration
inventory supported by the integrated assets of Hess
Midstream.
- Complementary Gulf of Mexico assets and steady free cash flow
from Southeast Asia natural gas business.
- Accretive to cash flow per share and extends growth into
2030s:
- Expected to be accretive to cash flow per share in 2025 after
achieving synergies and start-up of the fourth floating production
storage and offloading (FPSO) vessel in Guyana.
- Increases Chevron’s estimated five-year production and free
cash flow growth rates and expected to extend such growth into the
next decade.
- Increases cash returned to shareholders:
- In January, Chevron expects to recommend an increase to its
first quarter dividend per share of 8% to $1.63, which will be
subject to the approval of the Chevron Board of Directors.
- Post closing, Chevron intends to increase share repurchases by
$2.5 billion to the top end of its guidance range of $20 billion
per year in a continued upside oil price scenario.
- Capital and cost efficient:
- The combined company’s capital expenditures budget is expected
to be between $19 and $22 billion.
- With a stronger portfolio after closing, Chevron expects to
increase asset sales and generate $10 to $15 billion in before-tax
proceeds through 2028.
- The transaction is expected to achieve run-rate cost synergies
around $1 billion before tax within a year of closing.
Transaction Details
The acquisition consideration is structured with 100 percent
stock utilizing Chevron’s equity. In aggregate, upon closing of the
transaction, Chevron will issue approximately 317 million shares of
common stock. Total enterprise value of $60 billion includes net
debt and book value of non-controlling interest.
The transaction has been unanimously approved by the Boards of
Directors of both companies and is expected to close in the first
half of 2024. The acquisition is subject to Hess shareholder
approval. It is also subject to regulatory approvals and other
customary closing conditions.
The transaction price represents a premium of 10.3% on a 20-day
average based on closing stock prices on October 20, 2023.
Advisors
Morgan Stanley & Co. LLC is acting as lead financial advisor
to Chevron. Evercore also advised Chevron. Paul, Weiss, Rifkind,
Wharton & Garrison LLP is acting as legal advisor to Chevron.
Goldman Sachs & Co. LLC is acting as lead financial advisor to
Hess. J.P. Morgan Securities LLC also advised Hess. Wachtell,
Lipton, Rosen & Katz is acting as legal advisor to Hess.
Conference Call
Chevron will discuss its proposed acquisition of Hess with
security analysts in a call today, Monday, October 23, 2023, at
7:30 a.m. ET. A webcast of the meeting will be available in a
listen-only mode to individual investors, media, and other
interested parties on Chevron’s website at www.chevron.com under
the “Investors” section. Prepared remarks and presentation
materials for today’s call will be available prior to the call at
approximately 5:15 a.m. ET and located under “Events and
Presentations” in the “Investors” section on the Chevron
website.
About Chevron
Chevron is one of the world’s leading integrated energy
companies. We believe affordable, reliable and ever-cleaner energy
is essential to enabling human progress. Chevron produces crude oil
and natural gas; manufactures transportation fuels, lubricants,
petrochemicals and additives; and develops technologies that
enhance our business and the industry. We aim to grow our
traditional oil and gas business, lower the carbon intensity of our
operations and grow new lower carbon businesses in renewable fuels,
hydrogen, carbon capture, offsets and other emerging technologies.
More information about Chevron is available at www.chevron.com.
About Hess
Hess Corporation is a leading global independent energy company
engaged in the exploration and production of crude oil and natural
gas with leading positions offshore Guyana, the Bakken shale play
in North Dakota, the deepwater Gulf of Mexico and the Gulf of
Thailand. Globally, Hess is recognized as an industry leader in
environmental, social and governance performance and disclosure.
More information about Hess Corporation is available at
www.hess.com.
NOTICE
As used in this news release, the term “Chevron” and such terms
as “the company,” “the corporation,” “our,” “we,” “us” and “its”
may refer to Chevron Corporation, one or more of its consolidated
subsidiaries, or to all of them taken as a whole. All of these
terms are used for convenience only and are not intended as a
precise description of any of the separate companies, each of which
manages its own affairs.
Please visit Chevron’s website and Investor Relations page at
www.chevron.com and www.chevron.com/investors, LinkedIn:
www.linkedin.com/company/chevron, Twitter: @chevron, Facebook:
www.facebook.com/chevron, and Instagram: www.instagram.com/chevron,
where Chevron often discloses important information about the
company, its business, and its results of operations.
Non-GAAP Financial Measures - This news release includes
free cash flow. Free cash flow is defined as net cash provided by
operating activities less capital expenditures and generally
represents the cash available to creditors and investors after
investing in the business. The company believes this measure useful
to monitor the financial health of the company and its performance
over time.
FORWARD-LOOKING STATEMENTS
This communication contains “forward-looking statements” within
the meaning of the federal securities laws, including Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. You can identify these
statements and other forward-looking statements in this document by
words such as “expects,” “focus,” “intends,” “anticipates,”
“plans,” “targets,” “poised,” “advances,” “drives,” “aims,”
“forecasts,” “believes,” “approaches,” “seeks,” “schedules,”
“estimates,” “positions,” “pursues,” “progress,” “may,” “can,”
“could,” “should,” “will,” “budgets,” “outlook,” “trends,”
“guidance,” “commits,” “on track,” “objectives,” “goals,”
“projects,” “strategies,” “opportunities,” “potential,”
“ambitions,” “aspires” and similar expressions, and variations or
negatives of these words, but not all forward-looking statements
include such words.
Forward-looking statements by their nature address matters that
are, to different degrees, uncertain, such as statements about the
consummation of the potential transaction, including the expected
time period to consummate the potential transaction, and the
anticipated benefits (including synergies) of the potential
transaction. All such forward-looking statements are based upon
current plans, estimates, expectations and ambitions that are
subject to risks, uncertainties and assumptions, many of which are
beyond the control of Chevron and Hess, that could cause actual
results to differ materially from those expressed in such
forward-looking statements. Key factors that could cause actual
results to differ materially include, but are not limited to the
risk that regulatory approvals are not obtained or are obtained
subject to conditions that are not anticipated by Chevron and Hess;
potential delays in consummating the potential transaction,
including as a result of regulatory approvals; Chevron’s ability to
integrate Hess’ operations in a successful manner and in the
expected time period; the possibility that any of the anticipated
benefits and projected synergies of the potential transaction will
not be realized or will not be realized within the expected time
period; the occurrence of any event, change or other circumstance
that could give rise to the termination of the merger agreement;
risks that the anticipated tax treatment of the potential
transaction is not obtained; unforeseen or unknown liabilities;
customer, shareholder, regulatory and other stakeholder approvals
and support; unexpected future capital expenditures; potential
litigation relating to the potential transaction that could be
instituted against Chevron and Hess or their respective directors;
the possibility that the transaction may be more expensive to
complete than anticipated, including as a result of unexpected
factors or events; the effect of the announcement, pendency or
completion of the potential transaction on the parties’ business
relationships and business generally; risks that the potential
transaction disrupts current plans and operations of Chevron or
Hess and potential difficulties in Hess employee retention as a
result of the transaction, as well as the risk of disruption of
Chevron’s or Hess’ management and business disruption during the
pendency of, or following, the potential transaction; the receipt
of required Chevron Board of Directors’ authorizations to implement
capital allocation strategies, including future dividend payments;
uncertainties as to whether the potential transaction will be
consummated on the anticipated timing or at all, or if consummated,
will achieve its anticipated economic benefits, including as a
result of risks associated with third party contracts containing
material consent, anti-assignment, transfer or other provisions
that may be related to the potential transaction which are not
waived or otherwise satisfactorily resolved; changes in commodity
prices; negative effects of this announcement, and the pendency or
completion of the proposed acquisition on the market price of
Chevron’s or Hess’ common stock and/or operating results; rating
agency actions and Chevron’s and Hess’ ability to access short- and
long-term debt markets on a timely and affordable basis; various
events that could disrupt operations, including severe weather,
such as droughts, floods, avalanches and earthquakes, and
cybersecurity attacks, as well as security threats and governmental
response to them, and technological changes; labor disputes;
changes in labor costs and labor difficulties; the effects of
industry, market, economic, political or regulatory conditions
outside of Chevron’s or Hess’ control; legislative, regulatory and
economic developments targeting public companies in the oil and gas
industry; and the risks described in Part I, Item 1A “Risk Factors”
of (i) Chevron’s Annual Report on Form 10-K for the year ended
December 31, 2022 and (ii) Hess’ Annual Report on Form 10-K for the
year ended December 31, 2022, and, in each case, in subsequent
filings with the U.S. Securities and Exchange Commission (“SEC”).
Other unpredictable or factors not discussed in this communication
could also have material adverse effects on forward-looking
statements. Neither Chevron nor Hess assumes an obligation to
update any forward-looking statements, except as required by law.
You are cautioned not to place undue reliance on any of these
forward-looking statements as they are not guarantees of future
performance or outcomes and that actual performance and outcomes.
These forward-looking statements speak only as of the date
hereof.
CAUTIONARY NOTE TO INVESTORS
This communication uses certain terms relating to resources
other than proved reserves, such as unproved reserves or resources.
Investors are urged to consider closely the oil and gas disclosures
in Hess’ Annual Report on Form 10-K, File No. 1-1204, available
from Hess Corporation, 1185 Avenue of the Americas, New York, New
York 10036 c/o Corporate Secretary and on our website at
www.hess.com. You can also obtain this form from the SEC on the
EDGAR system.
IMPORTANT INFORMATION FOR INVESTORS AND STOCKHOLDERS
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act. In connection
with the potential transaction, Chevron expects to file a
registration statement on Form S-4 with the SEC containing a
preliminary prospectus of Chevron that also constitutes a
preliminary proxy statement of Hess. After the registration
statement is declared effective, Hess will mail a definitive proxy
statement/prospectus to stockholders of Hess. This communication is
not a substitute for the proxy statement/prospectus or registration
statement or for any other document that Chevron or Hess may file
with the SEC and send to Hess’ stockholders in connection with the
potential transaction. INVESTORS AND SECURITY HOLDERS OF CHEVRON
AND HESS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER
DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN
THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. Investors and security holders will be able to obtain
free copies of the proxy statement/prospectus (when available) and
other documents filed with the SEC by Chevron or Hess through the
website maintained by the SEC at http://www.sec.gov. Copies of the
documents filed with the SEC by Chevron will be available free of
charge on Chevron’s website at http://www.chevron.com/investors.
Copies of the documents filed with the SEC by Hess will be
available free of charge on Hess’ website at
http://www.hess.com/investors.
Chevron and Hess and certain of their respective directors,
certain of their respective executive officers and other members of
management and employees may be considered participants in the
solicitation of proxies with respect to the potential transaction
under the rules of the SEC. Information about the directors and
executive officers of Chevron is set forth in its Annual Report on
Form 10-K for the year ended December 31, 2022, which was filed
with the SEC on February 23, 2023, and its proxy statement for its
2023 annual meeting of stockholders, which was filed with the SEC
on April 12, 2023. Information about the directors and executive
officers of Hess is set forth in its Annual Report on Form 10-K for
the year ended December 31, 2022, which was filed with the SEC on
February 24, 2023, and its proxy statement for its 2023 annual
meeting of stockholders, which was filed with the SEC on April 6,
2023. These documents can be obtained free of charge from the
sources indicated above. Additional information regarding the
interests of such participants in the solicitation of proxies in
respect of the potential transaction will be included in the
registration statement and proxy statement/prospectus and other
relevant materials to be filed with the SEC when they become
available.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231023757132/en/
Investor Contacts: Jake Spiering Chevron
invest@chevron.com
Jay Wilson Hess investorrelations@hess.com
Media Contacts: Braden Reddall Chevron
breddall@chevron.com (925) 842 - 2209
Lorrie Hecker Hess hessexternalaffairs@hess.com (212) 536 -
8250
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