Chevron buys Hess for $53B amidst oil market uncertainty.
OAN’s James Meyers
8:34 AM – Monday, October 23, 2023
Chevron has made a bold move in the uncertain oil markets by acquiring rival company Hess. This strategic purchase, valued at $53 billion, with a total deal value of $60 billion including debt, will give Chevron greater access to U.S. shale production in Texas’ Permian Basin. Chevron Chairman and CEO Mike Wirth expressed excitement about the combination, stating, “This positions Chevron to strengthen our long-term performance and further enhance our advantaged portfolio by adding world-class assets.”
This latest deal follows Exxon Mobil’s recent acquisition of Pioneer Natural Resources for nearly $60 billion. Chevron also announced that the new deal will increase the company’s free cash flow, allowing for more share repurchases. Furthermore, it remains to be seen whether Chevron or ExxonMobil will face any antitrust challenges in completing their deals.
While Chevron’s shares fell 3% in premarket trading after the announcement, Hess’ shares experienced a slight increase. Hess CEO John Hess believes that this deal will make the company “stronger in every respect” and deliver value to shareholders.
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What impact does the acquisition have on Chevron’s free cash flow and the ability to carry out share repurchases?
Title: Chevron Makes a Striking Move in Uncertain Oil Markets with Acquisition of Rival Company Hess
Introduction:
In a significant development within the oil industry, Chevron has made a bold move by acquiring its rival company Hess. Valued at a staggering $53 billion, with a total deal value of $60 billion including debt, this strategic purchase positions Chevron to enhance its portfolio and strengthen its long-term performance. The acquisition will provide Chevron with greater access to U.S. shale production in Texas’ Permian Basin, a region renowned for its abundant reserves.
Chevron’s Strategic Move:
Chevron Chairman and CEO Mike Wirth expressed enthusiasm about the acquisition, emphasizing how it positions Chevron to further strengthen its competitive advantage through the addition of world-class assets. This move follows Exxon Mobil’s recent acquisition of Pioneer Natural Resources for nearly $60 billion, highlighting the intense competition within the oil industry and the drive for companies to secure valuable assets.
Impact on Free Cash Flow and Share Repurchases:
The acquisition not only fortifies Chevron’s position in the industry but also promises an increase in the company’s free cash flow. This improvement in cash flow will allow Chevron to carry out more share repurchases, providing additional benefit to its shareholders.
Potential Antitrust Challenges:
While these acquisitions may significantly benefit the acquiring companies, it remains to be seen whether Chevron, or its competitor ExxonMobil, will face any antitrust challenges in completing their respective deals. With such large-scale consolidations occurring within the industry, regulatory bodies will closely scrutinize the potential impact on competition.
Market Reaction:
Chevron’s share prices experienced a decline of 3% in premarket trading following the announcement of the acquisition. Conversely, Hess’ shares witnessed a slight increase, reflecting the positive sentiment surrounding the deal. Hess CEO John Hess believes that this acquisition will make the company “stronger in every respect” and deliver substantial value to its shareholders.
Conclusion:
Chevron’s acquisition of Hess marks a significant development in the oil industry. This strategic move not only enables Chevron to bolster its long-term performance and enhance its portfolio, but it also allows for increased free cash flow and share repurchases. While the market reaction has resulted in a temporary decline in Chevron’s share prices, the positive sentiment surrounding the deal is reflected in the slight increase in Hess’ share prices. As the industry navigates uncertain oil markets, these acquisitions will likely shape the future landscape and competitiveness within the sector.
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