Chevron has agreed to divest its ownership interests in Hess Midstream, along with its crude oil midstream assets in the Denver Julesburg (DJ) Basin in the US, as part of a transaction with Hess Midstream.
Under these definitive agreements, Chevron will transfer its entire stake in Hess Midstream and its DJ Basin assets in exchange for extended and revised Bakken midstream contracts and $200m in cash consideration.
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The revised Bakken commercial arrangements are expected to halve Chevron’s unit midstream costs in the Bakken.
The agreements, which extend the term of Bakken contracts through 2045, are intended to improve Chevron’s future earnings and return on capital employed.
Following the transaction, Chevron will fully deconsolidate Hess Midstream, including approximately $3.7bn of the latter’s debt.
As a result, Chevron anticipates a one-time after-tax loss of $3bn–4bn upon closing, as it cannot recognise future Bakken midstream cost savings as an asset.
The company expects the transaction to increase its return on capital employed by 0.5% on an absolute basis.
Chevron downstream, midstream and chemicals president Andy Walz said: “This transaction resets the commercial framework between our upstream and midstream assets in the Bakken and DJ Basins.
“It lowers our Bakken cost structure while positioning Hess Midstream to advance as an independent company.”
Chevron expects to sustain Bakken production through ongoing technology deployment and operational improvements drawn from its global shale and tight portfolio.
Hess Midstream, upon closing, will operate as an independent, multi-basin midstream company.
It will acquire Chevron’s DJ Basin crude oil and natural gas gathering and storage assets, primarily located in Weld County, Colorado.
These assets include around 400,000 barrels per day of oil gathering capacity, 300 million cubic feet per day of gas gathering capacity and around 420,000 barrels of storage capacity. They also comprise a 20% interest in the Saddlehorn pipeline, which connects the DJ Basin to the Cushing hub in Oklahoma.
The DJ Basin assets feature roughly 670,000 dedicated acres, supported by Chevron and other counterparties through 2045.
The agreements also see a reduction in the tariff rates Chevron pays for Bakken gathering and processing services from 2027 to 2033.
These contracts will convert from cost-of-service to a fixed-fee basis with inflation escalators, and contain a minimum revenue commitment set at 80% of Hess Midstream’s expected Bakken revenues from Chevron through 2033.
Chevron plans to scale back its Bakken drilling programme from three rigs to two in December 2026.
The deal, which has received approval from Hess Midstream’s conflicts committee, is subject to customary closing conditions and regulatory clearances and is expected to close by the end of 2026.
BofA Securities and Latham & Watkins advised Chevron, while Evercore and Gibson, Dunn & Crutcher advised the Hess Midstream conflicts committee.
Hess Midstream has updated its 2026 guidance and provided preliminary expectations for 2027, including projected adjusted earnings before interest, taxes, depreciation and amortisation of $850m–950m and free cash flow of $525m–625m.
