By Kiana Wilburg,
CEO, Guyana Energy Conference & Supply Chain Expo
American oil producer, Hess Corporation, announced on Monday that the Federal Trade Commission (FTC) antitrust review has been completed, paving the way for clearance on its US$53 billion deal with Chevron.
Notably, Chief Executive Officer (CEO) of Hess, John Hess, agreed not to serve on Chevron’s Board, as per the request of the FTC. However, he will retain a role as a strategic advisor and representative for Chevron on all matters pertaining to government relations and social investments for Guyana.
In a statement to the market, Hess said passing the FTC’s review was one of the key conditions for closing its transaction with Chevron. The deal between the two industry giants was first announced in December 2023. Chevron had said its definitive agreement allowed it to acquire all the outstanding shares of Hess in an all-stock transaction, valued at US$53 billion, or US$171 per share. The total enterprise value, including debt, is US$60 billion.
The acquisition of Hess would upgrade and diversify Chevron’s already advantaged portfolio, with a 30 percent stake in Guyana’s Stabroek Block. Importantly, the Stabroek Block is considered across the industry as an extraordinary asset with unparalleled cash margins and low carbon intensity that leads into the next decade. Hess’ Bakken assets also add another leading U.S. shale position to Chevron’s 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.
The initial deal also allowed for John Hess to join Chevron’s Board of Directors but this was blocked by the FTC following concerns raised about Mr Hess’ communications with a limited number of OPEC officials. Hess’ Board of Directors noted however that such a concern was without merit since “Mr. Hess’ public and private communications with OPEC officials were consistent with his communications with U.S. government officials, the International Energy Agency and global business leaders on what will be needed to ensure an affordable and orderly energy transition.”
Mr Hess will now take on a new role as advisor on Guyana and provide support for the Salk Institute’s Harnessing Plants Initiative.
Following the FTC’s clearance today, Hess commented: “We are very pleased that our merger with Chevron has cleared this significant regulatory hurdle. This transaction continues to be an outstanding deal for Hess and Chevron shareholders and will create a premier integrated energy company that is ideally positioned for the energy transition.”
While Hess and Chevron have cleared a critical regulatory hurdle, they must still face an arbitration case later next year. ExxonMobil and CNOOC, both partners of Hess in the prolific Stabroek Block, are of the firm view that they should be given first preference to any sale of interest in that offshore concession, currently holding over 11 billion of oil equivalent resources. That case will be heard in May 2025, with a decision likely by August or September.
Over the past five years, Hess Corporation has had the highest cash flow reinvestment rate of any oil company – majors and independents – and has been the only oil company to reinvest in excess of its cash flow in order to grow oil and gas supply.