Chevron Corporation has disclosed its intent to acquire Hess Corporation through an all-stock transaction, valuing the deal at an impressive $53 billion. This merger is the latest in a series of consolidations sweeping across the American oil sector.
Earlier this week, both corporations issued a joint statement elaborating on the acquisition’s specifics. Under the agreement, Hess stockholders are slated to obtain 1.025 Chevron shares for each Hess share they hold, which translates to a share price of $171 for Hess. The aggregate enterprise value of Hess, factoring in its debt, is projected to reach $60 billion post-acquisition.
This merger follows closely on the heels of another significant consolidation in the industry. Exxon Mobil Corporation recently finalized its $58 billion takeover of shale-oil producer Pioneer Natural Resources Co. These consolidations underscore the sustained relevance of the oil and gas sector in the global energy milieu.
Chevron’s Chairman and CEO, Mike Wirth, expressed his views on the merger, noting, “This strategic move positions Chevron to bolster our long-term performance and further enrich our advantaged portfolio by incorporating world-class assets.”
Hess Corporation shares a historic connection with the U.S. Virgin Islands. In 1966, operating as Hess Oil Virgin Islands Corporation, it established the oil refinery on St. Croix following the acquisition of land from Annie de Chabert. By October of that year, the refinery was up and running, with its capacity dramatically escalating to a peak of 650,000 barrels per day in 1974. In 1998, Hovensa LLC, a collaboration between Hess Corporation and PDVSA, assumed control over the refinery’s operations.
Over time, Hovensa navigated through several challenges, including a $5.3 million penalty in 2011 due to Clean Air Act violations. In 2012, the decision was made to cease refinery operations, though it operated as a storage terminal till 2015 before shutting down. Despite an unsuccessful acquisition bid by Atlantic Basin Refining, November 2015 saw Limetree Bay Terminals, backed by ArcLight Capital Partners and Freepoint Commodities, successfully purchasing the facility.
Investment Backdrop with ArcLight’s Engagement
ArcLight, an American private equity firm, channelizes the retirement savings of various stakeholders including Maine teachers, NFL players, and Mayo Clinic doctors into energy investments. In December 2015, under the Mapp administration, an agreement was inked with ArcLight to manage an oil storage terminal at the south shore facility. Jake F. Erhard of ArcLight Partners, envisioned the terminal as a new market hub, leveraging ArcLight’s extensive experience across the energy spectrum to maximize the site’s potential.
In 2018, the firm ramped up its investment to reinitiate oil refining, along with announcing the immediate recruitment of 1,200 personnel. Although the initial cost of restarting was estimated at $1.4 billion, it escalated to nearly $2.7 billion over time, as per Reuters.
Despite facing numerous delays exceeding a year, oil refining commenced on February 1, as announced by Limetree Bay. Jeffrey Rinker, Limetree’s CEO, expressed enthusiasm over the start of operations. However, several issues ensued, including environmental incidents leading to a 60-day refining halt ordered by the EPA in May following a major flare mishap.
As per a Reuters’ account, contractors engaged in the refinery’s restart are yet to be compensated fully for their services, according to liens filed with the U.S. Virgin Islands Recorder of Deeds.
The impact of these issues extends beyond the stakeholders, resonating with individuals like Linda Woods, a retired educator from Maine, who expressed her disdain over her retirement funds being channeled into fossil fuel ventures. She remains hopeful that the complications at Limetree Bay might prompt legislative measures to curb oil and gas investments by pension schemes in the future, terming it a potential “watershed moment.”