Chevron Corporation, announcing the sale of its ownership in Hess Midstream LP (NYSE: HESM) and crude oil field assets in the DJ Basin, has engaged in restructuring field contracts in Bakken and creating new agreements in these fields. These agreements include extending Bakken field contracts and reducing the company's field costs by approximately 50 percent, which could help improve profitability and return on investment in the future.
Contract Details and Financial Implications
In exchange for establishing an improved long-term business framework and a cash payment of $200 million, Chevron will transfer its ownership in Hess Midstream and its general partner position to Hess Midstream. Additionally, the crude oil field assets in the DJ Basin will also be included in this transfer. Chevron anticipates that with this deal, Hess Midstream will be completely separated from the company's balance sheet, which includes approximately $3.7 billion in Hess Midstream's debt. Furthermore, this deal is expected to improve the return on investment by 0.5 percent and create long-term economic value due to reduced cost structure and improved profitability.
Read more: Oil price rises to $101.63 amid supply threats
Impact on Production and Future Outlook
According to Andy Walz, President of Chevron's Downstream, Midstream, and Chemicals segment, this deal reconfigures the business framework between upstream and field assets in the Bakken and DJ Basin, reducing Bakken costs while positioning Hess Midstream for progress as an independent company. Chevron also expects to maintain production in the Bakken field through the deployment of innovative technologies and operational improvements drawn from its shale and global tight portfolio.
Next Steps and Required Approvals
This deal has been approved by the conflict of interest committee of the Hess Midstream general partner board, which includes all independent directors, and has been made after consulting with their independent legal and financial advisors. The deal is subject to customary closing conditions and regulatory approvals and is expected to reach finalization by the end of 2026.
Financial and Legal Advisors
BofA Securities serves as financial advisor and Latham & Watkins LLP serves as legal advisor to Chevron. Additionally, Evercore acts as financial advisor and Gibson, Dunn & Crutcher LLP serves as legal advisor to the conflict of interest committee of the Hess Midstream board in this transaction.
Read more: Comprehensive fuel consumption management and strengthening of transmission infrastructure by the caretaker of the Ministry of Oil · Chevron: The best option for oil investors in September
