Chevron Set for FTC Approval of $53 Billion Hess Deal

What You Need To Know

Chevron Corp's (NYSE: CVX) acquisition of Hess Corp (NYSE: HES) is nearing final approval from the U.S. Federal Trade Commission (FTC), with a decision expected as soon as this week. The proposed $53 billion all-stock deal has been under scrutiny since it was announced last October, with the FTC requesting additional information from Chevron in December. Although Hess shares saw a 3% increase in after-hours trading, Chevron's stock has lagged behind the energy sector due to uncertainties surrounding the merger.

The deal faces a significant challenge from Exxon Mobil (NYSE: XOM) and CNOOC Ltd, Hess's partners in a joint venture in Guyana. They are disputing the sale, claiming a right of first refusal on Hess's Guyana assets, which are a key part of the deal. This dispute will be arbitrated in 2025, with a decision expected between August and September of that year.

Chevron's move follows Exxon Mobil's recent $60 billion acquisition of Pioneer Natural Resources, along with other major deals like Occidental Petroleum’s purchase of CrownRock and Diamondback Energy's acquisition of Endeavor Energy Resources. These deals highlight a trend of consolidation in the U.S. oil and gas sector.

In the meantime, Exxon’s arbitration case concerning the Guyana assets could delay the full realization of Chevron’s Hess acquisition until the second half of 2025. Guyana's offshore oil reserves are a highly lucrative asset, with Exxon, Hess, and CNOOC collectively earning $6.33 billion in profits from the region last year.

Why This Is Important for Retail Investors

1. Guyana's Lucrative Oil Assets: Hess's stake in the Guyana joint venture is one of the fastest-growing and profitable oil reserves globally, with over 11.6 billion barrels of recoverable oil discovered since 2015.

2. Potential for Significant Earnings: The Guyana consortium, involving Exxon, Hess, and CNOOC, generated $6.33 billion in profits on $11.25 billion in revenue last year, indicating substantial earnings potential.

3. Consolidation in the Oil Industry: Chevron's $53 billion all-stock acquisition is part of a broader trend of consolidation in the oil and gas sector, where several multi-billion-dollar deals have been announced recently. This may lead to stronger competitive positioning for Chevron.

4. Future Growth Potential: While the Exxon-CNOOC dispute may delay the closing of the deal, the long-term growth outlook for Guyana's oil production remains promising, creating future earnings potential.

5. Competitive Positioning: The acquisition strengthens Chevron's position against major rivals like Exxon, as it expands its access to lucrative oil assets and production capacity.