In an effort to expand reserves amid rising oil prices, Chevron (NYSE:CVX) has finalized its all-stock acquisition of Hess (NYSE:HES), a move that led to a 3% decrease in the company's share price. This follows similar trends among oil companies, like Exxon (NYSE:XOM), which recently bought Pioneer Natural Resources (NYSE:PXD). The deal involved Chevron offering 1.025 shares for each Hess share and taking on $7 billion of Hess's debt.
The acquisition will grant Chevron access to significant energy resources, including Guyana's oil reserves and North Dakota's shale assets. This transaction will also lead to the issuance of about 317 million new Chevron shares, leading to dilution for existing shareholders.
Chevron CEO Mike Wirth remains optimistic despite the initial market reactions and the risks associated with major mergers. He asserts that the merger aligns with Chevron’s values and objectives for higher returns and lower carbon output. This optimism is supported by InvestingPro Tips, which highlight that Chevron has a track record of consistently increasing earnings per share and has raised its dividend for 35 consecutive years.
Long-term investors are also viewing this strategic move with optimism. They believe that this positions Chevron favorably in a future where oil continues to be a significant energy resource. Additionally, InvestingPro data suggests this could be a wise move, with Chevron's market cap standing at a substantial 301.09B USD and a promising P/E ratio of 10.2. The company also shows a strong revenue growth of 4.21% LTM2023.Q2 and a healthy dividend yield of 3.62% Y2023.D296.
As for Hess, InvestingPro Tips indicate that the company has been profitable over the last twelve months and has maintained dividend payments for 37 consecutive years. Its market cap, according to InvestingPro data, stands at 49.34B USD with a P/E ratio of 33.6. Despite a slow down in revenue growth recently, Hess has shown a strong return over the last five years.
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