Oil's Well That Ends Badly, Con't

Yet another massive oil giant consolidation buyout as Chevron buys Hess for $53 billion as record oil industry profits fuel tens of billions in stock buybacks and ludicrous executive bonuses, all while Americans continue to get robbed at the pump.

Chevron announced Monday that it has agreed to buy rival Hess in yet another oil industry consolidation deal.

Cash-rich oil giants are taking advantage of high prices and surging profits to snap up assets and boost returns for shareholders even as pressure builds for them to invest more in renewable energy.

The deal, worth $53 billion plus debt, would give Chevron even greater access to US shale production in Texas’ Permian Basin, a part of the industry where Chevron (CVX) has been a leader for years. Hess (HES) also has large oil assets in Guyana, which Chevron said would help grow its production over the next decade.

“This combination positions Chevron to strengthen our long-term performance and further enhance our advantaged portfolio by adding world-class assets,” said Chevron Chairman and CEO Mike Wirth.

Wirth said Chevron and Hess will be able to merge seamlessly, sharing “similar values and cultures,” including a commitment to “lowering carbon,” although environmental advocates have been very critical of oil companies’ slow acceptance of renewable energy alternatives.

Chevron said buying Hess would increase the company’s free cash flow, giving the company more cash on hand in the long term to do more share repurchases. Chevron said that it would increase buybacks of its stock by $2.5 billion to $20 billion a year.

Critics have slammed oil companies for spending tens of billions of dollars on stock buybacks rather than easing the pain for consumers at the pump or investing more heavily in the energy transition. Already cash rich, oil companies have scored record profits after Russia’s invasion of Ukraine pinched oil supplies and sent prices higher.

ExxonMobil (XOM) last year made a record $1,874 of profit for every second during the course of 2022.

Those profits have made oil companies deal-happy. Two weeks ago, Exxon announced it would buy shale company Pioneer for $60 billion, a deal that would more than double Exxon’s Permian Basin operations if it is completed.

It’s not clear whether ExxonMobil or Chevron will face antitrust hurdles to completing their deals. The Biden administration has been far more active in challenging corporate power on antitrust grounds than recent administrations.

Shares of Chevron slipped 3% in premarket trading following the deal announcement, while Hess’ shares were slightly higher. Since the start of 2022, just ahead of the big run-up in oil prices following Russia’s full-scale invasion of Ukraine, Hess shares are up 120%, while Chevron shares are up 42%.

 

Again, the industry is raking in record profits at our expense and any efforts to do anything about it get opposed by two-thirds of Congress and two-thirds of SCOTUS, all while the planet roasts. Something's got to give soon, whether it's the oil industry or the people at the pump.

Oil's been hovering around $80 all year, with gas prices around $3.50 a gallon. A brand-new Middle East war sparked by Israel and Hamas will only drive oil back up above $100 a barrel or higher, and the industry titans will only get more money as a result.

Our unsustainable energy situation is getting even more unsustainable. A crack-up is coming and when it does, all bets are off.