One of today’s trending stories involves oil giant Chevron (NYSE:CVX). Specifically, the oil company is buying oil producer Hess (NYSE:HES) for $53 billion. Despite the acquisition, HES stock is little changed today, however.
As of this writing, shares of HES are up less than 1% for the day with a market capitalization of around $50 billion. Meanwhile, CVX stock is down more than 2% so far today.
According to Chevron, the all-stock deal will not cause regulators to become concerned about antitrust issues.
HES Stock: Chevron Buys Hess for $53 Billion
This acquisition comes shortly after one of Chevron’s competitors, Exxon (NYSE:XOM), agreed to acquire Pioneer Natural Resources (NYSE:PXD) earlier this month for $60 billion. Pioneer Natural Resources is a huge shale oil producer.
As a result of the Hess deal, Chevron will obtain shale assets in North Dakota as well as a major oil field in the small South American country of Guyana. According to the Associated Press, Guyana is “poised to become the world’s fourth-largest offshore oil producer.”
Additionally, as a result of the acquisition, the growth of Chevron’s free cash flow and production is also expected to meaningfully accelerate over the next five years.
“With greater confidence in projected long-term cash generation, Chevron intends to return more cash to shareholders with higher dividend per share growth and higher share repurchases,” said Chevron Chief Financial Officer Pierre Breber.
The Hess acquisition comes as oil prices remain elevated due to the Russia-Ukraine War and the war between Israel and Hamas, the latter of which risks “igniting a broader conflict in the Middle East.”
What Comes Next?
Investors who own CVX stock and those who are thinking of buying shares of Chevron should watch geopolitical developments closely as well as U.S. and global economic trends and U.S. and global travel trends. All of these issues will affect oil prices going forward, which Chevron’s profits are primarily determined by.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
