Oil producers are making big bets on the industry’s future

Chevron has agreed to buy Hess in an all-stock deal worth $53 billion, the latest example of consolidation in the US oil and gas industry.

Driving the move… The prize jewel of the deal for Chevron is Hess’s ~30% share of the estimated 11 billion barrels of oil and gas found off the shores of Guyana, a South American country bordering Venezuela.

• The country’s oil production has ramped up like a halfpipe, going from nothing in 2019 to 400,000 barrels/day. And it’s not expected to stop there. The partners plan to be pumping 1.2 million barrels/day by 2027, making it one of the world’s fastest-ever oil developments and creating a projected $180 billion in market value for the companies involved in the consortium.

At the same time, US oil is making a resurgence. The Department of Energy announced on October 12 that American crude oil production had hit an all-time high of 13.2 million barrels/day.

Big picture: The Chevron/Hess deal comes on the heels of Exxon Mobil’s ~$60 billion acquisition of Pioneer Natural, both deals being made possible by huge profits from strong energy prices and demand since Russia's invasion of Ukraine. It also follows a recent prediction by the International Energy Agency that fossil-fuel demand globally would reach its peak this decade.