MW Hess and a U.K. nuclear plant show what $50 billion gets in the energy market

By Jules Rimmer

Two mammoth, but starkly contrasting, deals have been struck in energy markets in the last few days. One of them looks like a strategic coup with almost immediate payback while the reception for the other was more skeptical.

Chevron (CVX) on Friday closed its blockbuster acquisition of Hess for $55 billion in a transaction that took two years to complete. Then Tuesday, the British government greenlighted the commissioning of the Sizewell C nuclear plant for a price tag of GBP38 billion or about $51 billion. This project, however, has taken sixteen years to secure the funding and approval.

Chevron's deal may secure a performance bonus for CEO Mike Wirth. Sizewell C guarantees a next-decade headache for the U.K. government.

To draw some kind of equivalence between the two assets, according to Andy Lees, founding partner of research consultancy MacroStrategy, the planned nuclear plant will generate 3.2 gigawatts of energy every hour. One gigawatt hour is the energy within 588,000 barrels of oil, a bit more than Hess drills daily.

The appeal of the Hess acquisition is perhaps best captured by how fiercely Chevron's rival, Exxon Mobil, fought to block the deal. Hess holds a 30% stake in Guyana's offshore oil reserve, Stabroek Block, a coveted asset and one of the biggest finds in the last decade. After winning its legal battle against Exxon (XOM) , Chevron has materially improved its growth, as well as its free cash flow and production forecasts. The Guyana oil discovery is assessed at 11 million barrels of oil equivalent, with the world's lowest deepwater extraction costs of $25-$35 per barrel.

UBS, for example, reiterated its buy rating on Chevron and predicted the next analyst day on Nov. 12 could be a significant catalyst for the stock, once the benefits of the acquisition are explained and fleshed out. Chevron's chief financial officer Eimear Bonner applauded the "accretive transaction" that she expects "to achieve $1 billion of cost synergies by the end of 2025."

Chevron produces about 3.1 million barrels of oil per day while in first quarter 2025, Hess managed 476,000. For context then, the U.S. consumes roughly 20 million barrels a day, and so $54 billion represents some 2.0 -2.5% of America's oil needs.

Compare this then, to the much longer-term project of the Sizewell C nuclear power plant formally approved by the U.K. government Tuesday. The investment, aiming to generate 7% of Britain's power requirements, has been priced at GBP38 billion but this figure is almost double what was estimated only two years ago and it is not expected to produce electricity until the late 2030s.

A similar project, Hinkley Point C, also hoping to meet 7% of British energy needs, was initiated in 2016 and originally estimated to cost $18 billion. It is already way behind schedule and cost overruns have pushed the price up to $46 billion by the time it's supposed to be generating electricity to 2031. The same company, France's EDF, has been selected to construct both plants.

It's been estimated that to build Hinkley Point C is between 4-6 times more expensive per megawatt of capacity than South Korean nuclear power plants that rank alongside the Chinese as the cheapest to build. National security concerns meant that Chinese tenders were not considered.

The British government has done its best to mitigate the funding risk by spreading it around, and it has taken on 44% of the final deal with the remainder split between EDF, La Caisse, Amber Infrastructure and Centrica (UK:CNA). While the funding is split between public and private sources, cost overruns will be borne by the government.

Understandably, given Britain's checkered history with mega-projects, industry and media commentators have expressed doubts that Sizewell C can be completed on time and on budget, especially considering the delay in commissioning. Ed Miliband, now the energy secretary, was serving in the same post under Gordon Brown when this was first mooted 16 years ago.

-Jules Rimmer

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

July 22, 2025 10:07 ET (14:07 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.