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Chevron to acquire Hess in $60bn deal
1/11/2023
The acquisition of US independent operator Hess by California-based supermajor Chevron in a $60bn deal, inclusive of debt, is being touted by some industry observers as accelerating the trend of consolidation and big-money deals in the international oil and gas arena.
The deal follows hot on the heels of ExxonMobil’s takeover of Pioneer Natural Resources, announced last month. It will add 400,000 boe/d in net production for Chevron in 2024, of which almost 50% will come from Hess’ Bakken tight oil operations, 33% from offshore deepwater assets in Guyana and the US Gulf of Mexico, and the remaining 18% from the offshore shelf in south-east Asia. These additions, combined with a full year of production from the corporate buyout of PDC Energy, which closed in August, will increase Chevron’s total output base next year by approximately 25% year-on-year to 3.9mn boe/d.
According to Matthew Wilks, Senior Upstream Analyst, Rystad Energy, Chevron is ‘betting big’ on the future output of Hess’ 30% stake in the Stabroek block, located off Guyana. The block spans 6.6mn acres (26,800 km2) and is owned and operated by ExxonMobil (45%), partnered by Hess (30%) and CNOOC (25%). It is considered to be one of the most successful oil blocks in the world, with the block partners making some 30 discoveries since the first discovery in 2015 through the Liza-1 well, unearthing over 11bn boe of recoverable resources to date.
Chevron, through Hess, will get access to over 3.6bn barrels of discovered volumes through the deal, of which 3.4bn barrels will come from Guyana alone. This nearly triples the supermajor’s discovered volumes since 2015, according to Rystad Energy.
Given the deepwater block’s size, breakeven and low-carbon intensity, the Stabroek partners have accelerated its overall development. So far, five schemes have been sanctioned for development, and a sixth floating production, storage and offloading (FPSO) unit is lined up for approval in the next few months. ExxonMobil and its partners are also reported to be working on a seventh FPSO that could secure a final investment decision (FID) over the next year.
Collectively, over $40bn worth of investments have been sanctioned for development, which would help take Guyana’s installed oil production capacity to over 1mn b/d, suggests Rystad Energy.
As the FPSOs start producing, Chevron’s gross output will see a substantial increase. Hess’ share of gross crude oil volumes in Guyana are forecast to grow from the current 120,000 b/d to over 360,000 b/d in 2030 and to over 550,000 b/d in 2035.
Meanwhile, the deal will also see Chevron gaining a large footprint in one of the US’ ‘big five’ tight oil plays, with Hess’ stake in the Bakken complementing Chevron’s existing acreage in the Permian and Denver-Julesburg (DJ) basins. Chevron will assume 465,000 net acres under the acquisition, making it the fourth-largest acreage holder in the play.
Outside of Guyana and the Bakken, Hess has a net production of around 380mn cf of gas in Malaysia, including the Malaysia/Thailand joint development area (JDA), and around 160,000 b/d of liquids in the US Gulf of Mexico.
The Malaysian production mainly comes from the North Malay integrated development fields. The Malaysia/Thailand JDA production stems from the A-18 block, which includes the legacy Cakerawala, Bulan, Bumi and Suriya fields. In the US Gulf of Mexico, Hess’ major production comes from its operated stake at the Conger, Tubular Bells and Stampede developments.
