Chevron’s proposed US$60 billion (A$94 billion) acquisition of producer Hess Corporation has been hailed as the acceleration of a new era of global oil megamergers.
Chevron’s proposed US$60 billion (A$94 billion) acquisition of producer Hess Corporation has been hailed as the acceleration of a new era of global oil megamergers.
The deal announced by Chevron overnight will see it expand its holding in Guyana via a stake in ExxonMobil and CNOOC’s Stabroek block, which it expects to deliver production growth over a decade, as well as adding to its US domestic shale position through the Bakken operation in North Dakota.
The acquisition will add 400,000 barrels of oil equivalent per day to Chevron’s global net production, with the company’s total output base expected to jump 25 per cent year on year next year.
It follows Exxon’s $60 billion move for Pioneer Natural Resources two weeks ago, which expanded that company’s exposure in the Permian oilfield.
Rystad Energy senior upstream analyst Matthew Wilks said the deals over recent weeks had accelerated a period of megamergers in the oil and gas industry.
“Although [Chevron’s acquisition] continues the story started by the recent Exxon-Pioneer deal, the motivation and impact of this acquisition are significantly different,” he said.
“Chevron is betting big on the future output of Guyana and Hess’ stake in the offshore Stabroek block, which since 2015 has seen discoveries of more than 11 billion barrels of oil equivalent of recoverable resources.”
Wood Mackenzie vice president corporate research David Clark said the combination of the Exxon and Chevron deals had transformed the state of play for both companies as they positioned their portfolios for the decades ahead.
“Three weeks ago, Chevron was the leader among majors in the Permian, was underweight deepwater, and faced rising concern over portfolio concentration risk,” he said.
“ExxonMobil had a highly diverse portfolio, stronger deepwater exposure, but was just fifth-ranked by Permian volumes and inventory.
“Two deals later, Chevron, ExxonMobil and the merger and acquisition landscape have a very different feel. ExxonMobil now has easily the highest upstream portfolio concentration among the majors and has locked up a dominant position in the Permian midland basin.
“Chevron has addressed its portfolio concentration and is now the international oil company leader in deepwater.”
The move comes at an interesting time for Chevron domestically, where it is a major player in the WA LNG market.
Chevron’s Gorgon and Wheatstone projects off the coast of Western Australia account for around 47 per cent of the state’s gas supply and were subject to industrial action as part of a protracted dispute over enterprise agreements which concluded last week.
The company’s Australian managing director Mark Hatfield told a Business News Success and Leadership breakfast the company intended to spend tens of billions in its Australian projects over the years to come.
However, Mr Hatfield also expressed concerns over the environment for regulatory approvals in Australia as a hurdle to progress.
