We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Hess Corporation (HES - Free Report) , a U.S. oil and gas company, received the necessary approval from its shareholders on Tuesday to proceed with its proposed merger with Chevron Corporation (CVX - Free Report) , despite the ongoing arbitration concerning assets in the Stabroek block off the coast of Guyana.
Merger Details and Shareholders’ Approval
In October 2023, Chevron announced its intention to acquire Hess in a $53 billion all-stock deal, expected to close in the first half of 2024. Hess shareholders will receive 1.0250 shares of Chevron for each share of HES, taking the total enterprise value of the transaction, including debt, to $60 billion.
This merger is set to enhance Chevron's portfolio by adding Hess' assets, including those in the Guyana Stabroek block. In a special meeting held on May 28, the majority of Hess shareholders voted in favor of the merger. Notably, Chevron stockholder approval is not required for this transaction.
Arbitration Over Stabroek Block Assets
The approval came amid the arbitration proceedings initiated by ExxonMobil and CNOOC, Hess’ partners in the Stabroek block, who argue they have preemptive rights over Hess’ 30% interest in the oil-rich offshore block under the existing joint operating agreement.
These arbitration cases, filed before the International Chamber of Commerce in March 2024, seek to delay or potentially block the merger. Both Hess and Chevron oppose this claim and maintain that the preemptive rights claimed by the Stabroek block partners do not apply.
Regulatory Approvals and Merger Conditions
To complete the merger, several closing conditions must be met, including the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the resolution of the arbitration proceedings. The merger still requires approval from the Federal Trade Commission.
Guyana's Growing Oil Region
Since its first offshore discovery in 2015, Guyana has become the world's fastest growing oil region. The Stabroek block, covering 6.6 million acres, is operated by ExxonMobil with a 45% interest in the same. Hess holds a 30% interest, while CNOOC another 25%. The outcome of the arbitration process, which could extend into 2025, should determine whether the merger is proceeding as planned or facing significant delays.
Despite the arbitration, both Hess and Chevron are optimistic about the deal. John Hess, CEO of Hess, expressed satisfaction over the transaction's strategic value, highlighting shareholder recognition and the potential of a successful merger with Chevron.
Conclusion
While the merger faces hurdles due to the arbitration over the Stabroek block assets, the support from Hess shareholders marks a significant step forward. The merged entity would be a leading integrated energy firm with a robust portfolio and substantial financial resources, poised to deliver significant shareholder value in the coming years.
Zacks Rank & Key Picks
Hess and Chevron currently carry a Zack Rank #3 (Hold) each.
A couple of better-ranked stocks for investors interested in the energy sector are Marathon PetroleumCorporation (MPC - Free Report) and SM EnergyCompany (SM - Free Report) . While MarathonPetroleumsports a Zacks Rank #1 (Strong Buy) at present, SM Energy carries a Zack Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Marathon Petroleum's acquisition of Andeavor has expanded its foothold in the Permian Basin, creating an enviable retail and marketing portfolio. MPC’s emphasis on operational excellence, safety and environmental responsibility, coupled with investments in low-carbon initiatives, positions it well for sustainable growth and continued value creation for shareholders.
The Zacks Consensus Estimate for MPC’s 2024 earnings per share (EPS) is pegged at $19.28. The company has a Zacks Style Score of A for Value. It has witnessed downward earnings estimate revisions for 2024 in the past 30 days.
SM Energy is set to expand its oil-centered operations in the coming years, with an increasing focus on crude oil, especially in the Permian Basin and Eagle Ford regions. The company’s attractive oil and gas investments should create long-term value for shareholders.
The Zacks Consensus Estimate for SM’s 2024 EPS is pegged at $6.63. The company has a Zacks Style Score of A for Value. It has witnessed upward earnings estimate revisions for 2024 in the past seven days.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Hess (HES) Shareholders Approve Chevron Deal Amid Arbitration
Hess Corporation (HES - Free Report) , a U.S. oil and gas company, received the necessary approval from its shareholders on Tuesday to proceed with its proposed merger with Chevron Corporation (CVX - Free Report) , despite the ongoing arbitration concerning assets in the Stabroek block off the coast of Guyana.
Merger Details and Shareholders’ Approval
In October 2023, Chevron announced its intention to acquire Hess in a $53 billion all-stock deal, expected to close in the first half of 2024. Hess shareholders will receive 1.0250 shares of Chevron for each share of HES, taking the total enterprise value of the transaction, including debt, to $60 billion.
This merger is set to enhance Chevron's portfolio by adding Hess' assets, including those in the Guyana Stabroek block. In a special meeting held on May 28, the majority of Hess shareholders voted in favor of the merger. Notably, Chevron stockholder approval is not required for this transaction.
Arbitration Over Stabroek Block Assets
The approval came amid the arbitration proceedings initiated by ExxonMobil and CNOOC, Hess’ partners in the Stabroek block, who argue they have preemptive rights over Hess’ 30% interest in the oil-rich offshore block under the existing joint operating agreement.
These arbitration cases, filed before the International Chamber of Commerce in March 2024, seek to delay or potentially block the merger. Both Hess and Chevron oppose this claim and maintain that the preemptive rights claimed by the Stabroek block partners do not apply.
Regulatory Approvals and Merger Conditions
To complete the merger, several closing conditions must be met, including the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the resolution of the arbitration proceedings. The merger still requires approval from the Federal Trade Commission.
Guyana's Growing Oil Region
Since its first offshore discovery in 2015, Guyana has become the world's fastest growing oil region. The Stabroek block, covering 6.6 million acres, is operated by ExxonMobil with a 45% interest in the same. Hess holds a 30% interest, while CNOOC another 25%. The outcome of the arbitration process, which could extend into 2025, should determine whether the merger is proceeding as planned or facing significant delays.
Despite the arbitration, both Hess and Chevron are optimistic about the deal. John Hess, CEO of Hess, expressed satisfaction over the transaction's strategic value, highlighting shareholder recognition and the potential of a successful merger with Chevron.
Conclusion
While the merger faces hurdles due to the arbitration over the Stabroek block assets, the support from Hess shareholders marks a significant step forward. The merged entity would be a leading integrated energy firm with a robust portfolio and substantial financial resources, poised to deliver significant shareholder value in the coming years.
Zacks Rank & Key Picks
Hess and Chevron currently carry a Zack Rank #3 (Hold) each.
A couple of better-ranked stocks for investors interested in the energy sector are Marathon Petroleum Corporation (MPC - Free Report) and SM Energy Company (SM - Free Report) . While MarathonPetroleumsports a Zacks Rank #1 (Strong Buy) at present, SM Energy carries a Zack Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Marathon Petroleum's acquisition of Andeavor has expanded its foothold in the Permian Basin, creating an enviable retail and marketing portfolio. MPC’s emphasis on operational excellence, safety and environmental responsibility, coupled with investments in low-carbon initiatives, positions it well for sustainable growth and continued value creation for shareholders.
The Zacks Consensus Estimate for MPC’s 2024 earnings per share (EPS) is pegged at $19.28. The company has a Zacks Style Score of A for Value. It has witnessed downward earnings estimate revisions for 2024 in the past 30 days.
SM Energy is set to expand its oil-centered operations in the coming years, with an increasing focus on crude oil, especially in the Permian Basin and Eagle Ford regions. The company’s attractive oil and gas investments should create long-term value for shareholders.
The Zacks Consensus Estimate for SM’s 2024 EPS is pegged at $6.63. The company has a Zacks Style Score of A for Value. It has witnessed upward earnings estimate revisions for 2024 in the past seven days.