Chevron (CVX 3.88%) has a bright future. The oil and natural gas giant has lots of potential to grow in the coming years, and one big driver of that growth will be its recently closed acquisition of Hess. This deal should drive the oil stock much higher over the next five years.
The coming Hess-fueled free cash flow gusher
Chevron will reach a major inflection point in 2026. Free cash flow is on track to surge by an additional $12.5 billion in the coming year. Several catalysts will fuel this surge, including recently completed expansion projects, cost-cutting initiatives, and the acquisition of Hess.
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The company estimates that the Hess deal alone will add $2.5 billion to its free cash flow next year. Some of that is expected to come from the $1 billion in cost synergies it expects to achieve from the deal by the end of this year. Chevron will also benefit from the start-up of a fourth floating production, storage, and offloading vessel in Guyana, which came in the Hess deal. Hess had a 30% interest in the development of Guyana's Stabroek block -- now, Chevron does, and that will supply it with incremental additional production and free cash flow as its output ramps up over the next year.
ExxonMobil, which is leading the development in Guyana, recently started extracting oil from the Yellowtail project, bringing the total production capacity in the region to 900,000 barrels per day.
ExxonMobil expects to start up four more projects offshore from Guyana by 2030. That would bring the total production capacity to 1.7 million barrels per day. The growing production from this world-class low-cost resource will continue to increase Chevron's free cash flow over the next five years.
NYSE: CVX
Key Data Points
Chevron believes that its free cash flow from Guyana, Hess' other assets, and its legacy operations will total more than $100 billion over the next five years. That's the highest projected cumulative upstream free cash flow total within its peer group. This massive surge in free cash will enable Chevron to return a lot more money to shareholders, which I expect will send its share price soaring over the next five years.
