As energy prices surge, Chevron purchases Hess for $53 billion

The $53 billion acquisition of Hess Corp. by Chevron is not even the largest deal made in the energy sector this month as major producers take advantage of the spike in oil prices.

With Russia's invasion of Ukraine in the early months of 2022, crude prices spiked dramatically. They have since increased by a further 9% this year, and currently hover around $90 per barrel. Due to their financial success, large drillers are searching for new opportunities to invest.

The announcement that Pioneer Natural Resources would be acquired by Exxon Mobil for approximately $60 billion preceded the Chevron-Hess agreement by less than two weeks.

Hess is being paid for by Chevron via stock. For every Hess share owned by shareholders, 1.0250 shares of Chevron will be awarded. Chevron valued the transaction at $60 billion, including debt.

According to Chevron, the agreement will boost the amount of money returned to shareholders. The company hopes to recommend raising its first-quarter dividend to $1.63, an increase of 8%, in January. Board permission is still required for this. Upon closing of the transaction, the business also anticipates increasing stock buybacks by $2.5 billion to the upper end of its guidance range of $20 billion annually.

After six months of negotiations, the deal was accepted by the boards of both Hess and Chevron. It is expected to finalize in the first part of next year. The shareholders of Hess must still approve it. The company's CEO, John Hess, is anticipated to become a board member of Chevron. Much of Hess is owned by his family.