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Oil giant Chevron has entered a definitive agreement to buy oil and gas producer Hess for $53bn in an all-stock transaction indicating its belief that demand for fossil fuels will remain in years to come.

Hess has significant presence in Guyana through its Stabroek block and its Bakken assets adds another leading US shale position to Chevron’s DJ and Permian basin operations. The acquisition will increase Chevron’s oil and gas production by more than 10%.

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

The deal marks further consolidation in the US energy sector following ExxonMobil’s acquisition of Pioneer Natural Resources for $64bn earlier in October. In an interview with the Financial Times in September, Wirth defended Chevron’s plan to continue growing its output of oil and gas, saying the company is “not selling a product that is evil. We’re selling a product that’s good”.

European energy majors such as BP and TotalEnergies have pivoted towards renewable energy more drastically than their US counterparts.

Chevron’s shares fell by 3.4% in pre-market trading and Hess’s shares rose by 0.6%. The proposed deal values Hess’s shares at a 10.3% premium over their average over the previous 20 days.

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Lucille Jones, senior manager at LSEG Deals Intelligence, said of the deal: “It is the second largest deal announced so far this year globally, across all sectors and the 9th largest oil and gas M&A deal on record as well as Chevron’s all-time largest acquisition.”

“The acquisition puts M&A in the oil and gas sector to a total of $254bn globally so far during 2023, up 49% compared to the same period last year and the highest year-to-date total since 2014.”

Chevron was advised by Morgan Stanley and Evercore, while Hess were advised by Goldman Sachs and JP Morgan. John Hess, the CEO of Hess, will join the Chevron Board of Directors.