Chevron is bracing for a quarterly dent of up to $400 million as the cost of absorbing Hess filters through its books. The company said Thursday it expects a third-quarter loss of $200 million to $400 million tied to the $55 billion acquisition, with adjusted earnings clipped by $50 million to $150 million once severance and other transaction charges are stripped out.
The buyout, finalized in July after Chevron won a high-stakes arbitration against ExxonMobil, hands the U.S. major a 30% stake in Guyana’s Stabroek block—home to more than 11 billion barrels of discovered recoverable resources and one of the lowest-cost oil projects globally, with breakevens around $30 a barrel. Exxon remains operator with 45%, and CNOOC holds the rest.
Chevron is wagering that the Hess deal will extend its growth runway well into the next decade. But in the short term, the transaction adds costs just as weaker oil prices are already pressuring results. In Q2, Chevron’s earnings fell to $2.5 billion from $4.4 billion a year earlier, even as production hit a record 3.4 million BOE/d, including 1 million BOE/d in the Permian for the first time.
For Q3, Chevron expects production between 450,000 and 500,000 BOE/d, factoring in some downtime, with capital spending projected at $1 billion to $1.25 billion. That compares to $3.7 billion in capex in Q2, when it also returned $5.5 billion to shareholders—the 13th straight quarter of payouts above $5 billion.
Chevron’s new assets in Guyana and the Bakken do expand its portfolio, and those fields are expected to be profit engines in the coming years, but the purchase is adding costs right now. The company says the deal strengthens its growth outlook, though the near-term impact is lower quarterly earnings.
By Julianne Geiger for Oilprice.com
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