The bosses for Chevron Corp. and Hess Corp. met for dinner years ago, kicking off “friendly” talks that led to Monday’s $53 billion megadeal, the latest in a wave of consolidation washing over the US oil industry.
“We have been talking for a while,” Mike Wirth, chief executive officer for Chevron, said Monday in an interview alongside his counterpart from Hess, John Hess, on Bloomberg Television. “For quite some time, we’ve seen the fit and the appeal and have been working on this.”
The roots of the megamerger began when they had dinner together, and Wirth said they’ve had friendly discussions ever since, without disclosing the date of their first meeting.
Read More: Hess’s Industry-Beating Valuation Is Sign of Investor Confidence
Buying Hess will give Chevron 30% ownership of more than 11 billion barrels-equivalent of recoverable resources in Guyana, one of the world’s major new oil producers, Chevron said in a statement. It also adds acreage in the Gulf of Mexico and the Bakken, a smaller US shale basin than the Permian where production has already peaked.
The deal entered the “win zone” for both companies after Hess shares almost doubled in value last year, Hess said in the interview. Wirth added that growing cash flow from Hess’s Guyana asset also helped make the deal attractive to Chevron.
“The stocks of the two companies have traded into a range where it worked,” Wirth said. “Now is the time.”
(Adds quote in the penultimate paragraph. A previous version corrected details of the initial meeting in the third paragraph.)
Author: David Wethe, Alix Steel and Guy Johnson
