The move by Chevron to buy out Hess was not so much a surprise to Americas Market Intelligence (AMI) Director of Energy, Arthur Deakin. Why? Because of the current market trend of majors with deep pockets taking over smaller exploration and production (E&P) companies with attractive resources. And that is exactly what Hess had in its venture with ExxonMobil and CNOOC at Guyana’s Stabroek Block; 6.6 million acres with only a fraction explored and already 11 billion barrels of oil equivalent discovered.
Endless possibilities and the potential for significant growth. That is what this means for Guyana, as Deakin implied.
“Chevron has even more resources than Hess does. I think the biggest positive effect is that Chevron will have more resources to allocate to exploration…which may lead to more adventurous drilling in the Stabroek Block,” he commented in an exclusive interview with OilNOW on October 24.
“Overall, I think that this is a generally positive move for Guyana. It brings attention to the country, which is always good,” he added.
Deakin believes that Hess’ discoveries in the Stabroek Block played a “defining role” in Chevron’s acquisition. Another sweetener to the deal, he pointed out, was Guyana’s “relatively stable” investment environment, along with its fiscal and political frameworks.
Exxon – the Stabroek block operator – was the first to make a major buy, one analyst termed the biggest since it acquired Mobil. In an all-stock transaction valued at US$59.5 billion, Exxon will be merging with Pioneer Natural Resources, becoming the world’s first mega major and a shale powerhouse. The transaction has an implied total enterprise value of the transaction, including net debt, to approximately US$64.5 billion.
Deakin explained, “I think we are going to see [transactions like these] more and more, the constant consolidation of the oil and gas sector with a focus on larger companies which are pretty flush with cash buying out smaller sized companies that operate in areas where reserves are proven.”
Chevron will acquire all of the outstanding shares of Hess in an all-stock transaction valued at US$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 US$60 billion.