Chevron’s latest acquisition is the second buyout among major producers this month


Chevron is buying Hess Corp. for $53 billion, but even with that price tag, it’s not the biggest acquisition in the energy sector this month, reports The Associated Press.

Major producers are seize the initiative while oil prices surge, The Associated Press reports. Crude prices rose sharply in early 2022 with Russia’s invasion of Ukraine and are hovering around $90 per barrel after ticking another 9% higher this year. That means big drillers are flush with cash and looking for places to invest.

The Chevron-Hess deal comes less than two weeks after ExxonMobil said it would acquire Pioneer Natural Resources for about $60 billion.

Upward pressure on oil prices are being applied from a number of fronts, including the war in Ukraine. Oil markets are being stretched by cutbacks in oil production from Saudi Arabia and Russia, and now, the war between Israel and Hamas runs the risk of igniting a broader conflict in the Middle East. While attacks on Israel do not disrupt global oil supply, according to an analysis by the U.S Energy Information Administration, “they raise the potential for oil supply disruptions and higher oil prices.”

Chevron said this morning that the acquisition of Hess adds a major oil field in Guyana as well as shale properties in the Bakken Formation in North Dakota. Guyana is a South American country of 791,000 people that is poised to become the world’s fourth-largest offshore oil producer, placing it ahead of Qatar, the United States, Mexico and Norway. It has become a major producer in recent years with oil giants, including ExxonMobil, China’s CNOOC, and also Hess, squared off in a heated competition for highly lucrative oil fields in northern South America.

Chevron is paying for Hess with stock. Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. Including debt, Chevron valued the deal at $60 billion.

There have been a number of acquisitions focused on U.S. shale fields and another round of consolidation in the energy sector began during the pandemic as big producers sought to cut costs. In the summer of 2020, Chevron announced that it was buying Noble Energy for $5 billion. Chevron made the deal when crude prices were down more than 30% in the midst of the coronavirus pandemic. That same year, ConocoPhillips bought shale producer Concho Resources in an all-stock deal valued at $9.7 billion. Read the full story.