Chevron Corporation has entered into a series of definitive agreements with Hess Midstream LP to revise its midstream arrangements in the Bakken and establish new contracts in the DJ Basin. The transaction includes the transfer of Chevron’s ownership interests and general partner position in Hess Midstream, along with its DJ Basin crude oil midstream assets, in exchange for a revised commercial framework and $200 million in cash consideration.
Under the revised agreements, the Bakken midstream contracts will be extended. Chevron expects the changes to reduce its unit midstream costs in the Bakken by approximately 50%, improving future earnings and returns on capital employed. Chevron also expects to fully deconsolidate Hess Midstream following completion of the transaction. This would remove approximately $3.7 billion of Hess Midstream debt from Chevron’s consolidated balance sheet.
The company expects the transaction to increase return on capital employed by 0.5 percentage points on an absolute basis. It also expects the revised commercial arrangements to generate long-term economic value through lower costs and improved earnings. Chevron expects to record a one-time after-tax loss of approximately $3 billion to $4 billion at closing. The loss is expected because the company cannot recognise anticipated future savings from lower Bakken midstream costs as an asset.
“This transaction resets the commercial framework between our upstream and midstream assets in the Bakken and DJ Basins,” said Andy Walz, Chevron’s President of Downstream, Midstream and Chemicals. He said the agreement would lower Chevron’s Bakken cost structure while allowing Hess Midstream to operate as an independent company.
Chevron said it would continue to sustain Bakken production through technology deployment and operational improvements developed across its global shale and tight-oil operations. The transaction has received approval from the Conflicts Committee of the board of directors of Hess Midstream’s general partner. The committee consists entirely of independent directors and consulted independent legal and financial advisers during its review.
Completion remains subject to customary closing conditions and regulatory approvals. Chevron expects the transaction to close by the end of 2026. BofA Securities is serving as financial adviser to Chevron, while Latham & Watkins LLP is acting as its legal adviser.
Evercore is advising the Hess Midstream general partner’s Conflicts Committee on financial matters, with Gibson, Dunn & Crutcher LLP providing legal advice. The agreements will change Chevron’s financial and commercial relationship with its Bakken and DJ Basin midstream operations while establishing a revised cost structure for its upstream production activities.
