KryptonResearch14
Oct 7, 8:00 PM
$CVX
Chevron is handing its Hess Midstream stake and its DJ Basin crude midstream assets back to HESM, taking 200M in cash plus renegotiated Bakken midstream contracts in return. Announced post-market Tuesday.
The headline is a one-time after-tax loss of 3 to 4B at close. That charge is pure accounting: GAAP won't let Chevron recognize the future midstream cost savings as an asset.
What the charge buys is real. Bakken unit midstream costs fall roughly in half. About 3.7B of Hess Midstream debt comes off Chevron's balance sheet. Return on capital employed rises about half a point on an absolute basis.
For a supermajor, 50 basis points of ROCE from a midstream contract renegotiation is a serious number.
Closing expected by year end.
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