Chevron Corporation (NYSE: CVX) has agreed to divest its ownership interests in Hess Midstream LP (NYSE: HESM) and its DJ Basin crude oil midstream assets to Hess Midstream in exchange for $200 million in cash and restructured long-term midstream contracts, according to a press release.

The revised Bakken contracts are expected to reduce Chevron's unit midstream costs in the region by approximately 50%. Chevron will also transfer its general partner position in Hess Midstream as part of the transaction.

Chevron expects to fully deconsolidate Hess Midstream, removing approximately $3.7 billion of Hess Midstream's debt from its balance sheet. The company projects the deal will be accretive to return on capital employed by 0.5% on an absolute basis.

At closing, Chevron expects to record a one-time after-tax loss of approximately $3 billion to $4 billion, which the company said reflects its inability to recognize future Bakken midstream cost savings as an asset. The loss is expected to be treated as a special item.

"This transaction resets the commercial framework between our upstream and midstream assets in the Bakken and DJ Basins," said Andy Walz, Chevron's President of Downstream, Midstream and Chemicals. "It lowers our Bakken cost structure while positioning Hess Midstream to advance as an independent company."

The transaction has been approved by the Conflicts Committee of the Board of Directors of the general partner of Hess Midstream, comprised entirely of independent directors. The deal is subject to customary closing conditions and regulatory approvals and is expected to close by year-end 2026.

BofA Securities and Latham & Watkins LLP are serving as financial and legal advisors to Chevron, respectively. Evercore and Gibson, Dunn & Crutcher LLP are advising the Conflicts Committee.