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What Chevron’s Acquisition of Hess Corp. Will Mean for North Dakota’s Oil Patch

FARGO — Hess Corp.’s roots in the North Dakota Oil Patch date back to the discovery of oil in a field south of Tioga in 1951, a finding that marked the beginning of oil production in the state.

Amerada Petroleum made that discovery was made by Amerada Petroleum, which Hess later acquired. The company was known as Amerada Hess until 2006.

Now, in a deal valued at $53 billion announced on Monday, Oct. 23, Chevron has plans to acquire Hess Corp. By acquisition, Chevron will become one of North Dakota’s top petroleum operators.

Through its affiliate, Hess Bakken Investments, Hess operates more than 1,600 oil wells in North Dakota and company officials predicted in January that the company this year would produce between 165,000 and 170,000 barrels per day in the state.

“Hess has been really the flagship of North Dakota production in the entire Williston Basin,” said Ron Ness, president of the North Dakota Petroleum Council. “In my 24 years, Hess has been the leader in all things,” Ness added, with the company ranking as the state’s third-biggest producer, behind Continental Resources, Inc. and Chord Energy Corp., formed by the merger of Oasis Petroleum and Whiting Petroleum.

Ness learned of the merger in an early morning text message, which he called a “Monday morning shocker,” and noted Hess’s involvement in North Dakota’s oil production since the very beginning.

“It’s a significant change, but having a super-major in the state like Chevron; hopefully they can grow their presence in the state,” he said.

As of the 2010s, Hess had about 800,000 acres in North Dakota Bakken Shale, and started increasing their stake in the early 1980s.

Over time, Hess had divested most of its U.S. operations to concentrate its efforts in North Dakota, Ness said.

“John Hess directed basically all of their U.S. assets to grow their Bakken footprint,” he said, referring to John Hess, the company’s chief executive officer.

‘A bigger player’

Hess Corp. maintains a large corporate presence in Minot, where it has a regional headquarters, with approximately 400 employees, said Brekka Kramer, president and CEO of the Minot Area Chamber of Commerce and Economic Development Corp.

“It’s one of the largest plays for Hess Corp., so they’ve invested a lot of money in North Dakota,” she said. “They’re a great corporate partner. I hope that will continue.”

Geoff Simon, executive director of the Western Dakota Energy Association, which represents counties, cities and school districts in energy-producing counties in North Dakota, said Chevron and Hess have certain similarities, although Chevron is larger.

“It’s a bigger player and potentially more capital for North Dakota,” he said. “I think it’s potentially a good thing. I would expect they’re going to retain their assets here,” which Simon said fit well with Chevron’s footprint and strategy. “It seems to me a pretty good thing.”

In January, Hess announced plans to invest $3.7 billion in oil discovery this year — 80% in the North Dakota Bakken Shale Formation as well as offshore reserves in Guyana, an emerging production area where Chevron is expanding its operations.

Besides being one of the top oil producers in North Dakota, Hess operates gathering and distribution pipelines for oil and gas as well as gas processing plants, giving it a pervasive presence in the Oil Patch.

Since 2014, the year Hess doubled the operating capacity of its Tioga Gas Plant, the company had invested $7.8 billion in oil drilling and production and paid $2.3 billion in royalties in North Dakota as of 2022, the company told legislators.

As of 2014, Hess reported owning 1,350 miles of gas and natural gas to liquids gathering pipelines and 550 miles of oil gathering pipeline in the state.

Chevron’s purchase of Hess was the latest sign of consolidation in the petroleum industry, a sign analysts said reflects the view that fossil fuels will remain an important energy source.

A ‘good sign’ for North Dakota

The acquisition of Hess Corp. will give Chevron access to an Exxon-led partnership to develop what the Wall Street Journal described as a “generational” oil find in Guyana. Two weeks earlier, Exxon bought Pioneer Natural Resources, another oil and gas company.

John Hess owns about 9% of the company and is expected to take a seat on the board of Chevron, the United States’ second-ranked oil company, the Wall Street Journal reported.

Having John Hess on the Chevron board is a “good sign,” Ness said, adding that he hopes Hess will be able to persuade the company to remain invested in North Dakota.

Hess Corp. has been a significant charitable donor, giving $25 million to fund “Succeed 2020,” a statewide educational initiative to help North Dakota students prepare for college and careers, as well as $12 million for tribal education, $1 million for North Dakota flood relief in 2011 and $100,000 for the Great Plains Food Bank in 2020.

Source : INFORUM