Chevron's Portfolio Reshaping Strategy to Unlock Stronger Returns
Chevron Corporation CVX is reshaping its midstream portfolio through agreements with Hess Midstream LP HESM that could strengthen the economics of its Bakken operations. Chevron will divest its ownership interests and general partner position in Hess Midstream, along with DJ Basin crude oil midstream assets, in exchange for $200 million in cash and improved long-term commercial terms.
The biggest benefit is the expected reduction in Bakken unit midstream costs by roughly 50%. Lower gathering, transportation and processing expenses should support future earnings and improve the competitiveness of Chevron’s upstream development in the basin. The revised Bakken agreements will also extend through 2045, giving the company greater cost visibility over the long term and supporting disciplined investment decisions.
Chevron also expects to fully deconsolidate Hess Midstream, removing about $3.7 billion of debt from its balance sheet. Management expects the transaction to increase return on capital employed by around 0.5%, reinforcing Chevron’s focus on lower cost structure and capital efficiency after its Hess acquisition and sharpening its portfolio around higher-return upstream opportunities.
The deal, however, comes with a near-term accounting hit. Chevron expects to record a one-time after-tax loss of roughly $3 billion to $4 billion at closing because future midstream cost savings cannot be recognized as an asset.
Overall, the divestment deal with Hess Midstream appears designed to trade ownership complexity for lower costs, cleaner financial exposure and stronger upstream returns. With the transaction expected to close by year-end 2026, the move could make Chevron’s Bakken portfolio more efficient and financially attractive.
Other Energy Companies Reshaping Their Portfolios
Reshaping portfolios has become an important aspect for companies as they evaluate businesses based on their ability to generate sustainable returns and cash flow. A few other energy companies are also doing the same.
Shell plc SHEL continues to reshape its portfolio through disciplined capital allocation, divesting non-core or lower-priority assets while directing capital toward businesses with stronger strategic fit and returns. Management said portfolio high-grading is aimed at releasing value from assets where Shell is no longer the natural owner and reallocating proceeds toward higher-quality opportunities. Recent moves include exiting Na Kika and Coulomb, BG Cyprus and European onshore renewables, while selectively adding flexible U.S. gas-fired generation and ARC Resources. This supports Shell’s broader goal of building a more focused, resilient and higher-return portfolio.
California Resources Corporation CRC is reshaping its portfolio around a more integrated, California-focused energy platform. The company completed the $63 million Crimson Midstream acquisition, adding about 2,000 miles of pipeline infrastructure to improve market access, operating flexibility and flow assurance. At the same time, California Resources agreed to divest its non-core Uinta Basin assets for about $90 million, freeing capital for higher-return California opportunities and shareholder returns. This follows the Aera and Berry mergers, which expanded CRC’s scale and footprint, reinforcing management’s strategy of concentrating capital on advantaged California assets.
The Zacks Rundown on Chevron
Shares of Chevron have gained 18% in the past three months, outperforming the Oil/Energy sector’s rise of 8.3%.
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The Zacks Consensus Estimate for CVX’s 2026 earnings is pegged at $17.47 per share, indicating 139.6% year-over-year growth.
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Over the past 60 days, analysts have raised the estimate for CVX’s 2026 earnings per share from $15.13 to $17.47, marking a 15.5% upward revision that reflects confidence in the company’s growth outlook.
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CVX stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
