M&A News: Chevron (CVX) Reshapes Portfolio with $525M East Texas Gas Asset Sale
U.S.-based oil giant Chevron (CVX) announced the sale of 70% of its stake in East Texas gas assets for $525 million, aligning with its broader strategy to streamline and optimize its portfolio. The stake will be acquired by TG Natural Resources, a subsidiary of Tokyo Gas (TKGSF), and Castleton Commodities International. CVX stock gained 0.72% on Monday, bringing its year-to-date gain to 15.5%.
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Key Details of Chevron's $525M Asset Sale
Under the terms of the deal, $75 million will be paid in cash, while the remaining $450 million will be structured as a capital carry to support the development of the Haynesville shale formation. Notably, Chevron owned about 70,000 acres of land in the Haynesville Shale, a dense natural gas reservoir in East Texas. As a result of this acquisition, TG Natural Resources will expand its Haynesville inventory by adding over 250 gross drilling locations, assuming an average of four wells per section.
Meanwhile, for Chevron, this divestment is part of its previously announced plan to sell between $10 billion and $15 billion worth of assets by 2028, as part of its strategy to optimize its global energy portfolio.
Additionally, the deal is expected to bring Chevron more than $1.2 billion in value based on current Henry Hub natural gas prices. This value will come from a long-term capital carry, Chevron's remaining 30% ownership stake, and its right to receive a share of future production revenue (overriding royalty interest). In context, Henry Hub's natural gas price is the benchmark price for natural gas in the U.S.
Is CVX a Good Stock to Buy?
Turning to Wall Street, CVX stock has a Strong Buy consensus rating based on 11 Buys and three Holds assigned in the last three months. At $176.64, the average Chevron price target implies a 5.6% upside potential.
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