Hess Corporation ( HES ) and Chevron Corporation ( CVX )  shares are trading higher on Tuesday.

On Monday, the Federal Trade Commission (FTC) completed an antitrust review of the merger of both companies, satisfying a critical closing condition for the transaction.

To facilitate the merger’s completion, Hess and Chevron ( CVX ) have agreed that Hess CEO John Hess will not be on the Chevron ( CVX ) board.

Exxon Mobil Corp ( XOM ) and its partner CNOOC Ltd had earlier asserted their right of first refusal to any sale of Hess’ stake in a Guyana oil-producing joint venture. The arbitration panel is expected to hear these claims in May 2025.

Piper Sandler analyst Ryan M. Todd raised the valuation of Guyana (net to HES) from $40.6 billion to $45.6 billion, translating to $132 to $149 per share, due to notable increases in discovered resources and productivity in Guyana.

The analyst estimates Hess’ stand-alone value at around $170 per share with Brent priced at $75 per barrel, suggesting that Hess is a compelling value opportunity for the first time in years.

Notably, given strong reservoir productivity and successful debottlenecking (12%-20% improvement), Todd expects each FPSO’s peak productive capacity to increase from approximately 2.0 Mboe/d to around 2.5 Mboe/d.

The analyst adds that while second-quarter production was 192 kbd (net to HES) in Guyana, they expect net production to peak at around 775 kbd, reflecting a 17% annual CAGR for nearly a decade, with peak CFO and FCF projected at $10.3 billion and $8.7 billion, respectively, vs. a $2.2 billion breakeven in 2023.

On the other hand, Wolfe Research analyst Doug Leggate upgraded Hess from Peer Perform to Outperform with a price target of $150.

The bullish outlook reflects the analyst’s view that current market conditions and the potential merger outcomes give Hess shares an attractive risk/reward profile, indicating that the valuation remains compelling regardless of whether the deal with Chevron ( CVX ) proceeds.

Leggate cited three scenarios for Hess that support a positive outlook. The first scenario envisions the successful merger with Chevron ( CVX ), closing the current 11% arbitrage gap between the valuations of Hess and Chevron ( CVX ).

If the merger fails, the analyst expects Hess to trade based on its fundamentals, with a fair value starting point projected at about $150 per share.

The third scenario examines a failed merger, indicating that Hess has shown a willingness to be acquired, with Chevron ( CVX ) likely remaining the sole interested party, says the analyst.

Price Action: HES shares are up 1.9% at $138.38, while CVX shares rose 1.28% at $149.17 at the last check Tuesday.

Image via Shutterstock

Read Next:

Chevron ( CVX ), Honeywell Join Forces For AI Breakthrough: Details