Chevron's (NYSE:CVX) $53 billion takeover deal, announced Monday, somewhat stole the thunder from today’s earnings release at Hess Corp (NYSE:HES); nevertheless, third-quarter financial results confirmed that the takeover target is in rude health.
On daily net production of 395,000 barrels oil equivalent per day (boepd), versus 351,000 boepd this time last year, Hess generated $504 million ($1.67 per share) of net income for the three-month period with revenue reported at $2.84 billion. This was comfortably ahead of Wall Street forecasts of around $1.15 per share, on $2.34 billion of revenue.
Production in the Bakken shale region totaled 190,000 boepd, up 14% year-on-year, whilst the company’s 30% share of production from the giant Liza field offshore Guyana amounted to 108,000 barrels of oil per day (bopd) – and following a repair in October, it is now yielding 150,000 to 160,000 bopd.
A further 28,000 bopd came from the Gulf of Mexico and 69,000 bopd was produced in South-East Asia.
In its midstream operations, Hess generated $66 million of net income.
Penciling its outlook for the fourth quarter, Hess told investors it expects to produce 390,000 boepd, which is at the top-end of prior guidance, though it also noted that the capex bill for the ongoing development of Liza will increase to $4.1 billion in 2023, from $3.7 billion, as the purchase of a floating production vessel originally slated for 2024 was brought forward into this year.
In New York, Hess stock was largely unmoved, having spiked higher earlier this week with the takeover news.
At $155.17 per share, the NYSE listing equates to a market capitalization of $47.66 billion.
The all-stock acquisition deal, announced Monday, values each Hess share at $171 per share and including debt, the enterprise value of the deal amounts to $60 billion.
Chevron said the combined company is expected to grow production and free cash flow faster and for longer than its current five-year guidance.
Pierre Breber, Chevron's chief financial officer said this greater confidence in long-term cash generation meant the oil giant “intends to return more cash to shareholders with higher dividend per share growth and higher share repurchases."
On closure, Chevron intends to increase share repurchases by $2.5 billion to the top end of its guidance range of $20 billion per year in a continued upside oil price scenario. It also expects to increase its first-quarter dividend per share by 8% to $1.63 in January.
The deal upgrades and diversifies Chevron's portfolio, the firm said in a statement, boosting its shale assets and adding the Stabroek block in Guyana which it called “an extraordinary asset.”