Chevron has announced its acquisition of Hess in a significant all-stock transaction valued at $53 billion. This move aims to boost returns for shareholders.

In this agreement, each Hess shareholder will receive 1.025 Chevron shares for every Hess share they hold, valuing each Hess share at $171. When considering debt, the deal’s total worth is $60 billion.

Following this announcement, Hess shares slightly rose to $163.04, while Chevron shares experienced a 2.1% decline to $163.38.

This acquisition is part of the ongoing consolidation within the oil and gas sector. 

Exxon Mobil recently confirmed its all-stock purchase of Pioneer Natural Resources for $64.5 billion, and both Exxon and Chevron have made smaller acquisitions this year. Chevron, for example, acquired Colorado producer PDC Energy for $6.3 billion.

However, some experts expressed surprise at this deal. 

Chevron operates Hess’s largest asset, Guyana, which makes up about 75% of Hess’s total value. 

Yet, Chevron chose to go ahead with the acquisition. Some analysts believed Chevron would acquire a company with more assets aligned with its existing portfolio.

Chevron’s plans don’t stop at the acquisition. Alongside the deal, they are looking to recommend an 8% increase in their first-quarter dividend per share to $1.63. 

If oil prices remain robust following their record profit in 2022, Chevron intends to raise share repurchases by $2.5 billion to the upper end of their $20 billion annual guidance range.

The merger, approved by both companies’ boards, is expected to be finalized in the first half of 2024. 

It is anticipated to yield $1 billion in cost savings before taxes within a year of completion. 

Chevron aims to increase asset sales and generate $10 billion to $15 billion in proceeds before tax through 2028.

While Chevron and Exxon may have temporarily exhausted their ability for megadeals, smaller independent U.S. energy companies, particularly those heavily present in the Permian Basin, may remain attractive targets for future acquisitions. Companies like SM Energy and Callon Petroleum could be next in line for potential takeovers.