CFRA, an independent research provider, has provided MT Newswires with the following research alert. Analysts at CFRA have summarized their opinion as follows:
CVX is buying upstream peer Hess Corporation (HES 163 ***) in an all-stock deal valued at about $58 billion. Per the deal, each share of HES will be exchanged for 1.025 shares of CVX stock. We estimate the deal at an enterprise value to 2024 EBITDA multiple of 8.1x, in line with HES’s five-year historical forward average, and only 1% above HES’s current multiple. The deal is expected to close in early 2024, and CVX views it as accretive by 2025. We like the deal for CVX both from a strategic and valuation standpoint. Strategically, CVX adds more oil exposure in long-cycle plays (Guyana), which complements CVX’s expansion in the short-cycle Permian Basin. On valuation, we are surprised at the minimal premium needed, and the lack of a cash component implies to us that CVX still has a tremendous amount of dry powder for both share buybacks and dividend hikes. Our 12-month target price remains $180 on a 6.2x EV/EBITDA multiple, in line with CVX’s historical forward average; shares yield 3.6%.