Chevron Corporation (NYSE:CVX) announced today that several of its subsidiaries have entered into a series of definitive agreements with Hess Midstream LP (NYSE:HESM) to restructure the terms of its Bakken midstream contracts and establish new DJ Basin midstream contracts. The revised agreements extend the Bakken contracts and are expected to reduce Chevron's Bakken unit midstream costs by approximately 50%, enhancing future earnings and return on capital employed. In exchange for the improved long-term commercial framework and $200 million in cash consideration, Chevron will transfer to Hess Midstream its ownership interests and general partner position in Hess Midstream, as well as its DJ Basin crude oil midstream assets.

As part of this transaction, Chevron expects to fully deconsolidate Hess Midstream, including approximately $3.7 billion of Hess Midstream's debt. Chevron expects this transaction to be accretive to return on capital employed by 0.5% on an absolute basis and generate long-term future economic value through a lower cost structure and improved earnings. At closing, Chevron expects to recognize a one-time after-tax loss estimated at approximately $3 to $4 billion,1 given that the company is unable to recognize future Bakken midstream cost savings as an asset.

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