Chevron increases renewable fuel market share with REG acquisition

It comes as US oil refiners compete for strategic advantages and limited low carbon feedstock resources

Chevron Corporation (NYSE: CVX) and Renewable Energy Group, Inc. (NASDAQ: REGI) (REG) announced on Monday a definitive agreement under which Chevron will acquire the outstanding shares of REG in an all-cash transaction valued at $3.15 billion, or $61.50 per share.

The acquisition combines REG’s growing renewable fuels production and leading feedstock capabilities with Chevron’s large manufacturing, distribution, and commercial marketing position.

The takeover comes as US oil refiners, transitioning to renewable diesel production, compete for strategic advantages and limited low carbon feedstock resources.

“REG was a founder of the renewable fuels industry and has been a leading innovator ever since”, said Chevron Chairman and CEO Mike Wirth. “Together, we can grow more quickly and efficiently than either could on its own.”

Renewable Energy Group is the largest biodiesel producer by volume in the United States – as well as a producer and supplier of many other products. REG operates 11 biorefineries in the US and Europe. In 2020, REG produced 519 million gallons, or 1.7 million tonnes, of biofuel delivering 4.2 million tonnes of carbon reduction.

Renewable Energy Group is expected to release fourth quarter and full year 2021 financial results Tuesday, March 1, 2022.

Chevron expects to have the capacity to produce 100,000 barrels per day of renewable diesel and sustainable aviation fuel (SAF) by 2030 and to have all their US diesel sales include renewable or biodiesel content by the end of the decade. This transaction is expected to accelerate Chevron’s progress toward its goal.

“This transaction delivers premium cash value to shareholders and will give us additional resources as we aim to accelerate growth and strengthen our collective ability to deliver the sustainable fuels our customers and the world need”, said CJ Warner, REG president & CEO. “Our employees’ hard work and dedication have built a fantastic renewable fuels company and made this transaction possible. We look forward to joining Chevron’s team.”

The transaction is expected to be accretive to Chevron earnings in the first year after closing and accretive to free cash flow after the start-up of REG’s Geismar expansion. The transaction has been approved by the Boards of Directors of both companies and is expected to close in the second half of 2022. The acquisition is subject to REG shareholder approval. It is also subject to regulatory approvals and other customary closing conditions.

What to read next
The recent shift is supported by the country's increased biodiesel blending mandate and there are moves to raise it further in the coming years
The project also creates a traceability system for all diesel cycle fuels to help ensuring the quality of the fuels
The future of the US ethanol sector lies in sustainable aviation fuel, with a string of industry voices laying out expectations that the sector’s future growth and expansion will increasingly be entwined with efforts to decarbonize aviation during the National Ethanol Conference in San Diego
What are the main challenges on the path to decarbonization and the adoption of sustainable aviation fuels for the aviation industry?
Published in a recent Gaftaworld issue, Tim Worledge, editorial director at Fastmarkets Agriculture shares his view on oilseeds and veg oils 2024 demand outlooks
The 45 projects slated to produce the biofuel could produce up to 1.7 million tonnes of sustainable jet fuel by 2023, analysis from Transport & Environment showed