- Chevron win in the arbitration ruling against Exxon Mobil paves the way for the Hess merger.
- The company is targeting $1B in merger synergies by yearend.
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Chevron Corp's CVX win in the arbitration ruling against Exxon Mobil Corp XOM has cleared the way for the acquisition of Hess Corp HES.
"While this outcome was somewhat anticipated by the market, it nevertheless lifted a key overhang on the stock, which had clouded the long-term outlook given the unique cash flow growth potential from HES's 30% stake in the world class Guyana resource base," JPMorgan analyst Arun Jayaram said in a note.
The Thesis: Although the ruling was favorable, Chevron's stock surprisingly declined by0.9% on Friday, the analyst stated.
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The pullback seems to have been due to "index-related selling pressure," which should ease this week, he added.
Chevron said that the merger with Hess would enhance its upstream portfolio, which could drive "significant free cash flow and production growth through 2030+." Jayaram wrote.
The company is targeting $1 billion in merger synergies by the end of 2025, which comes from three segments, namely, $500 million from corporate cost reductions, $200 million from eliminating put options from hedges, and $300 million in cash tax savings, the analyst further said.
CVX Price Action: Shares of Chevron had declined by 0.06% to $149.95 at the time of publication on Monday.
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