Oil major Chevron (CVX) is waiting for its $53 billion acquisition of rival Hess Corp. (HES) to be approved by regulators and the courts. In the meantime, Chevron is buying HES stock on the open market.
Regulatory filings just revealed that Chevron purchased 4.99% of Hess’ outstanding shares as the price slumped to $145. Barron’s reports that Chevron made the stock purchase because it considers HES stock to be trading at a discount currently.
Chevron has offered to buy all of Hess’ stock for about $171 per share as part of the $53 billion acquisition. However, the purchase is being delayed by a legal claim. In the meantime, HES stock has fallen along with the entire oil and natural gas sector, enabling Chevron to purchase the shares at a discount to the price it initially offered.
Dispute with Exxon Mobil
Chevron announced it was buying Hess in October 2023. But the deal has been stalled since then. The legal issue involves a claim by fellow oil major Exxon Mobil (XOM). Specifically, Exxon says that it has a right of first refusal to buy Hess’ stake in a major offshore project in Guyana, which is home to one of the world’s most productive oil fields.
Exxon is the operator of the Guyana project, and Hess owns a nonoperating stake. The International Chamber of Commerce in Paris will hold an arbitration hearing in May, with a decision expected to come sometime in the three months after the hearing. If Exxon wins, there is a likelihood that Chevron’s purchase of Hess crumbles.
However, some analysts say that HES stock is likely to rise even if the Chevron purchase doesn’t go through. In the meantime, Chevron is taking advantage of a good deal when it sees one. CVX stock has risen 7% in the last 12 months.
Is CVX Stock a Buy?
Chevron’s stock has a consensus Strong Buy rating among 14 Wall Street analysts. That rating is based on 11 Buy and three Hold recommendations assigned in the past three months. The average CVX price target of $176.64 implies 10.95% upside from current levels.
Read more analyst ratings on CVX stock
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