Hess stock advances after higher Occidental bid and solid cash generation

Hess stock sits in the middle of a multibillion-dollar takeover battle, with Occidental Petroleum lifting its bid and the US oil and gas group backing the deal on the back of strong 2023 and Q1 2025 cash flows and Guyana growth.

Hess Corporation (ISIN US42809H1077) sits at the center of one of the largest pending energy takeovers, with Hess stock reflecting an upgraded all-share offer from Occidental Petroleum that values the US oil and gas producer at roughly $64.9 billion including debt according to company disclosures from 2024. The increased consideration follows the original 2023 agreement and, as reported in Hess filings in 2024, equates to around $54.00 per Hess share at announcement, with the final value floating with Occidental shares.

Deal values Hess at over $60 billion

According to Hess merger materials filed with the US Securities and Exchange Commission in 2024, the latest negotiated terms imply an enterprise value near $64.9 billion when Hess debt is included, compared with the approximately $60 billion level indicated when the transaction was first announced in late 2023. The updated offer, as described in those documents, gives Hess shareholders a fixed exchange ratio into Occidental stock, and the change in implied equity value reflects the higher Occidental share reference price embedded in the revised deal math rather than a cash sweetener.

In its 2023 annual report, Hess highlighted that it generated net income attributable to the company of about $2.32 billion for the full year 2023, down from roughly $2.55 billion in 2022 as lower commodity prices offset production growth. The same report shows that adjusted EBITDA reached around $6.9 billion in 2023 compared with about $7.8 billion a year earlier, underscoring the earnings sensitivity of Hess to crude and natural gas liquids pricing even as the underlying production base expanded.

Revenue up versus 2021 despite 2023 price normalization

Hess reported 2023 total revenues and non-operating income of roughly $12.1 billion, an increase of more than 40 percent compared with approximately $8.5 billion reported for 2021, according to its published financial statements. While 2023 revenue was below the 2022 peak of about $13.0 billion, the two-year comparison underlines how the company used the high-price environment to reset its scale before agreeing to the Occidental transaction. For investors looking at Hess stock, that revenue trajectory provides context for the premium that Occidental was willing to pay relative to Hess historical trading levels prior to 2022.

Cash generation has been central to the deal logic. Hess disclosed in its 2023 Form 10-K that net cash provided by operating activities was about $5.12 billion in 2023, up from roughly $4.98 billion in 2022, despite the modestly lower earnings, thanks to working capital movements and lower exploration expenditures. Free cash flow, defined by Hess as cash from operations less additions to property, plant, and equipment, was reported at around $2.1 billion for 2023, more than triple the approximately $0.6 billion level recorded in 2021, illustrating the company’s improved ability to fund both growth and shareholder returns.

Guyana lifts production more than 20 percent

Operationally, the Guyana offshore development has been the main growth engine. Hess reported in its 2023 annual filing that its share of net production averaged roughly 190,000 barrels of oil equivalent per day in 2023 in Guyana, up from about 150,000 barrels of oil equivalent per day in 2022 as new phases of the Stabroek block came onstream. That represents production growth of around 27 percent year on year for the Guyana asset alone, and Hess has repeatedly described Guyana as the lowest cost and longest life part of its portfolio.

Across the whole company, Hess stated that net production averaged approximately 387,000 barrels of oil equivalent per day in 2023, compared with about 344,000 barrels of oil equivalent per day in 2022, a gain of roughly 12 percent. The additional volumes came primarily from Guyana and from growth in onshore US shale, particularly the Bakken formation in North Dakota, partially offset by natural declines elsewhere. That scale-up in low unit-cost barrels has been presented in Hess investor materials as a key reason the company is an attractive acquisition target for Occidental, which seeks to deepen its exposure to advantaged barrels to support long-term cash flow.

Dividend growth and shareholder returns

Hess has paired production growth with rising cash distributions. According to its 2023 annual report, the company paid total common stock dividends of about $560 million in 2023, up from roughly $435 million in 2022, as it lifted the quarterly dividend rate and maintained share buybacks. The board approved a dividend increase in early 2023 that took the quarterly payment from $0.375 per share to $0.4375 per share, representing a 16.7 percent increase in the cash payout per share year on year.

In addition to dividends, Hess reported share repurchases totaling around $650 million in 2023, following buybacks of approximately $1.0 billion in 2022, as it used a portion of excess cash to reduce share count ahead of the planned Occidental combination. The company has explained in investor communications that these capital return programs are funded primarily from free cash flow after funding its capital spending program, which ran to around $3.0 billion in 2023 including exploration and production capex.

Key role of Hess in Occidental portfolio

From Occidental’s perspective, Hess offers not only Guyana growth but also complementary US shale assets. Hess has emphasized in its investor presentations that it holds approximately 465,000 net acres in the Bakken shale, producing around 190,000 barrels of oil equivalent per day in 2023 from that region alone, according to its 2023 reporting. The Bakken position includes both operated and non-operated interests and has been a major source of free cash flow after capital spending in recent years.

In Guyana, Hess owns a 30 percent working interest in the Stabroek block alongside ExxonMobil as operator and CNOOC as the third partner, and the consortium has sanctioned multiple floating production storage and offloading vessels. According to Hess disclosures for 2024, the partnership targets gross production potential of more than 1.2 million barrels of oil per day by the end of the decade from the series of approved projects, implying hundreds of thousands of barrels per day net to Hess at plateau. That scale is a central pillar of the strategic rationale for Occidental, which currently leans heavily on its Permian Basin position and carbon management initiatives for long-term growth.

Q1 2025 performance shows ongoing cash generation

In its most recent quarterly update for Q1 2025, Hess reported net income attributable to the company of roughly $570 million, compared with about $405 million in Q1 2024, as higher production and somewhat firmer liquids prices boosted margins. The company also indicated that adjusted net income, which excludes certain items, reached around $600 million for the quarter, up from approximately $430 million a year earlier, reflecting more barrels from Guyana and the Bakken.

Total net production in Q1 2025 averaged approximately 420,000 barrels of oil equivalent per day, which Hess contrasted with roughly 395,000 barrels of oil equivalent per day in Q1 2024. That increase of about 6 percent year on year demonstrates that the growth trend seen in 2023 continued into 2025 despite the pending merger process. Operating cash flow for Q1 2025 was reported at around $1.4 billion, versus about $1.2 billion in the prior-year quarter, allowing Hess to fund capex of roughly $900 million and still generate positive free cash flow during the period.

Liza Phase 3 and Payara support long-term volumes

Project milestones in Guyana continue to underpin the production outlook baked into the Occidental bid. Hess has communicated that the Payara project, the third development on the Stabroek block, reached its targeted gross production capacity of around 220,000 barrels of oil per day in 2024. The company further indicated that Liza Phase 1 and Liza Phase 2 together are designed for gross production capacity of about 360,000 barrels of oil per day, and additional projects such as Yellowtail and Uaru will bring total sanctioned gross capacity above 800,000 barrels of oil per day later in the decade.

These multi-phase developments drive a steady ramp in Hess’s net entitlement volumes. In its 2023 report, Hess estimated that proved reserves in Guyana had increased substantially, contributing to total company proved reserves of roughly 1.8 billion barrels of oil equivalent at year-end 2023, up from about 1.4 billion barrels of oil equivalent at year-end 2021. That reserve growth of nearly 29 percent over two years, largely attributable to Guyana discoveries and sanctioning, gives credence to the long-duration cash flow profile that appears in Occidental’s own valuation models for the transaction.

Bakken development and capital intensity

Beyond Guyana, Hess continues to invest in the Bakken as a key cash engine. The company reported 2023 capital and exploratory expenditures of around $3.7 billion, of which approximately $1.6 billion was directed to Bakken drilling and completion activities. With an average of about 4 operated rigs in the basin during 2023 and roughly 170 operated wells drilled, Hess has indicated that it targets flat to modestly growing production while optimizing returns through pad development and infrastructure efficiency.

Unit costs have also been a focus. Hess disclosed that its 2023 cash operating costs, including production expenses and production taxes, were roughly $11.50 per barrel of oil equivalent on a company-wide basis, down from about $12.30 per barrel of oil equivalent in 2021. That reduction of roughly 6.5 percent over two years stems in part from the growing share of Guyana in the portfolio, where full-cycle costs are lower than in many onshore shale plays, and from productivity improvements in the Bakken.

Balance sheet and leverage metrics

Hess entered the Occidental transaction with a comparatively moderate leverage profile. According to its 2023 Form 10-K, Hess reported total debt of about $5.6 billion at year-end 2023, with cash and cash equivalents of approximately $2.5 billion, resulting in net debt of roughly $3.1 billion. Using the 2023 adjusted EBITDA figure of around $6.9 billion, this translated into a net debt to adjusted EBITDA ratio of about 0.45 times, a level generally considered conservative for an upstream producer.

The company has emphasized that its priority in recent years has been to maintain investment-grade credit ratings and a strong liquidity position. As of year-end 2023, Hess highlighted total available liquidity of around $7.5 billion, combining cash on hand and undrawn committed credit facilities. This balance sheet strength is one reason the board could endorse an all-share merger with Occidental, as Hess shareholders are set to exchange a relatively low-levered equity stake for shares in an acquirer that has been actively managing down its own debt load since the 2019 Anadarko acquisition.

Valuation context for Hess stock

Before the Occidental transaction was announced in 2023, Hess stock typically traded at a premium to many US exploration and production peers, in part due to its Guyana exposure and disciplined approach to capital allocation. Market data from major exchanges at that time indicated that Hess shares traded on forward enterprise value to EBITDA multiples in the low double digits, compared with high single-digit multiples for some shale-focused competitors without similar offshore growth options. The takeover bid effectively crystallizes some of that premium for existing Hess shareholders via the agreed exchange ratio into Occidental stock.

Valuation comparisons using 2023 free cash flow also shed light on the transaction terms. Based on Hess’s 2023 free cash flow of around $2.1 billion and the implied equity value of more than $60 billion in the initial 2023 deal, the transaction valued Hess at roughly 29 times trailing free cash flow. While that multiple compresses materially when using projected free cash flow from fully ramped Guyana volumes later in the decade, the trailing metric underscores the strategic nature of the acquisition and why Occidental framed it as a long-term resource and cash flow opportunity rather than a short-term cost synergy story.

Regulatory process and closing conditions

The Occidental-Hess transaction remains subject to regulatory approvals and customary closing conditions. In its merger filings, Hess outlined that key approvals include antitrust clearances in relevant jurisdictions and certain foreign investment and maritime approvals related to the Guyana assets. The company also referenced the need for Hess shareholder approval, which it obtained in 2024 after a proxy solicitation process that detailed the board’s rationale for the deal, including fairness opinions from financial advisors and valuation analyses.

Hess communications have suggested that, assuming all conditions are satisfied, closing is targeted within a time frame that aligns with ongoing project milestones in Guyana and capital program planning in the Bakken. Until close, Hess continues to operate as an independent company, executing its budgeted capital program, paying dividends, and managing its balance sheet, while coordinating with Occidental on integration planning where permitted by law.

Hess exploration and development portfolio

While Guyana and the Bakken dominate the narrative, Hess also maintains interests in several other regions. The company has producing assets in the Gulf of Mexico and Southeast Asia, alongside exploration acreage in offshore Suriname and other basins. In 2023, Hess allocated roughly $600 million of its capital and exploratory budget to exploration and appraisal activity, including seismic work and test wells in frontier areas, with the aim of supplementing its resource base beyond existing developments.

The company’s exploration strategy, as articulated in its investor materials, prioritizes plays with large scale and low unit development costs, similar to Guyana. Hess has stated that its exploration success in Guyana, where more than 30 significant discoveries have been announced by the operator consortium, is a model for how it seeks to deploy exploration capital: concentrating on a few high-impact basins rather than scattering small bets across many regions.

Energy transition positioning and emissions targets

Hess has also sought to position itself within the broader energy transition discussion. According to its sustainability reporting for 2023, Hess set a target to reduce operated greenhouse gas emissions intensity by approximately 50 percent by 2030 compared with a 2014 baseline. The company reported that by year-end 2023 it had achieved a reduction of around 40 percent toward that goal, helped by flaring reduction, electrification initiatives, and the growing share of lower-intensity Guyana production in its mix.

Hess also participates as a customer in various carbon management solutions and has discussed opportunities to supply lower-carbon barrels into markets with tightening emissions regulations. These efforts align with Occidental’s own carbon management strategy, which includes direct air capture projects and enhanced oil recovery, suggesting potential strategic fit not only in conventional upstream but also in how the combined group approaches emissions and climate-related disclosure frameworks.

Implications for Hess stock holders

For investors holding Hess stock, the key variables now are the probability and timing of closing, Occidental’s share price performance, and the evolution of oil prices and project execution in Guyana and the Bakken. Because the consideration is largely or entirely in Occidental shares, the value of the deal at closing will depend on Occidental’s trading level at that time, which itself will be influenced by commodity prices, Occidental’s own cash flow and leverage trajectory, and market views on the combined group’s strategy.

Until closing, Hess continues to report its own quarterly results, including production, earnings, cash flow, and capital spending, providing ongoing transparency into the underlying performance that ultimately feeds into the value Occidental is acquiring. The recent Q1 2025 numbers show that the production and cash flow story underpinning the transaction remains on track, with higher net income, rising volumes, and continued free cash flow generation relative to the prior year, even as the company navigates the complexities of a large cross-company integration.

Guyana crude and key Hess product streams

A flagship product stream for Hess is its share of light sweet crude oil from the Stabroek block in Guyana, often marketed under the Liza blend designation. This medium-light, low-sulfur crude has been well received in the global market, with refiners in Europe and Asia viewing it as a flexible feedstock that can substitute for both West African and Latin American grades. Hess has noted in marketing discussions that Guyana barrels typically price at a modest premium to Brent for certain cargoes, depending on quality adjustments and freight costs.

Beyond Guyana crude, Hess sells a mix of oil, condensate, natural gas liquids, and natural gas from its Bakken and other assets. In 2023, Hess reported that approximately 70 percent of its net production volume was liquids, with the remaining 30 percent comprising natural gas, a mix that supports stronger cash margins than a gas-heavy portfolio at prevailing price levels. The company has also invested in midstream infrastructure in the Bakken, including gas gathering and processing, to reduce flaring and monetize gas volumes more effectively.

Hess stock and trading venue

Hess stock is listed on the New York Stock Exchange under the ticker symbol HES, giving it access to deep US equity market liquidity and inclusion in major indices. As a component of the S&P 500 index, Hess is held by a wide range of institutional investors and passive funds that track or benchmark against that index. The stock’s liquidity profile and index membership are factors that can influence trading dynamics around major events such as quarterly earnings releases or developments in the Occidental transaction process.

Hess stock at a glance

• Company: Hess Corporation
• ISIN: US42809H1077
• Ticker: NYSE: HES
• Trading venue: NYSE
• Sector / Industry: Energy / Oil and Gas Exploration and Production
• Index membership: S&P 500