Chevron Corp. (NYSE:CVX) experienced a significant post-earnings selloff that resulted in a reduction of approximately $6.5 billion in the value of its all-stock offer for Hess Corp.
Chevron’s stock slumped by as much as 5.9% on Friday following a substantial profit miss of 66 cents per share, mainly attributed to unexpectedly weak overseas refining results. This decline affected the returns that investors were expected to gain from the 1.025 Chevron shares they would receive for each unit of Hess stock.
As a consequence of this drop, the deal premium for Hess investors diminished from 10% when the agreement was initially announced on October 23 to 3.1%.
Despite the decline in Chevron’s share price, the deal itself is not at risk, as indicated by Vincent Piazza, an analyst at Bloomberg Intelligence. He pointed out that once the deal is completed, Hess investors will hold a liquid stock supported by a robust buy-back program.
Chevron’s overseas refineries delivered roughly half of the net income that analysts had expected. The company’s crude production business in the Permian Basin underperformed, and costs at the extensive Tengiz project in Kazakhstan increased by around 4%. In response to Chevron’s performance, Hess also saw a drop in its share price, declining by 5% to $141.51.
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