Chevron Swaps Hess Midstream Stake for 50% Lower Bakken Costs — and a $200 Million Payment

Chevron Corporation (NYSE:CVX) said Tuesday that several subsidiaries entered into agreements with Hess Midstream LP (NYSE:HESM) to restructure Bakken midstream contracts and establish new agreements for DJ Basin assets.Under the deal, Chevron will transfer its ownership interests and general partner position in Hess Midstream, along with its DJ Basin crude oil midstream assets. In return, Chevron will receive improved long-term commercial terms and $200 million in cash.Chevron Targets 50% Cut in Bakken Midstream CostsChevron said the revised agreements will extend its Bakken contracts and cut unit midstream costs by about 50%.The company expects the lower cost structure to support future earnings and improve return on capital employed.Chevron also expects to fully deconsolidate Hess Midstream, including about $3.7 billion of Hess Midstream debt.The transaction is expected to improve Chevron’s return on capital employed by about 0.5 percentage points on an absolute basis.Expects $3 Billion to $4 Billion ChargeHowever, Chevron expects to record a one-time after-tax loss of about $3 billion to $4 billion at closing. The company said accounting rules prevent it from recognizing future Bakken midstream cost savings as an asset. The company expects to treat the charge as a special item.Andy Walz, Chevron’s president of Downstream, Midstream and Chemicals, said the deal creates a new commercial framework between the company’s upstream and midstream operations in the Bakken and DJ basins.He added that the agreement should lower Chevron’s Bakken cost structure while allowing Hess Midstream to operate as an independent company.Chevron said it plans to sustain Bakken production through technology deployment and operating improvements drawn from its broader shale and tight oil portfolio. See More: Top Value Stocks Deal Expected to Close by Year-EndThe Conflicts Committee of the board of Hess Midstream’s general partner approved the transaction after consulting independent legal and financial advisers.The deal remains subject to customary closing conditions and regulatory approvals. Chevron expects it to close by the end of 2026.Chevron Shuffles Senior LeadershipSeparately, Chevron announced several senior leadership changes Monday, effective Jan. 1, 2027.Chief Financial Officer Eimear Bonner will become president of Oil, Products & Gas, while New Energies President Jeff Gustavson will succeed her as CFO.Vice Chairman Mark Nelson will retain his role while taking responsibility for Strategy and Business Development. Meanwhile, Offshore President Brent Gros will become president of New Energies and oversee Chevron’s artificial intelligence strategy.Price Action: Chevron shares were up 0.53% at $208.68 and Hess Midstream shares were down 3.41% at $37.36 during premarket trading on Wednesday, according to Benzinga Pro data.Photo via Shutterstock Read Also: Robinhood's Investment Chief Says She Prefers Owning Energy Stocks Over ETFs — Should These Stocks Be on Your Radar?