Chevron is buying smaller rival Hess Corp. for $53 billion in what marks the second proposed mega-merger in the energy sector this month as major producers seize the initiative while oil prices surge.

The Chevron-Hess deal comes less than two weeks after Exxon Mobil said that it would acquire Pioneer Natural Resources for about $60 billion.

The proposed deal raises the competition between Chevron, the No. 2 U.S. oil and gas producer behind Exxon, and it will make it an unusual partner with its bigger rival in Guyana, as Hess, along with China’s CNOOC, were working together to develop drilling in the nascent Latin American producer.

The deal also signals Chevron’s plans to continue boosting investments in fossil fuels as oil demand remains strong and big producers use acquisitions to replenish their inventory after years of under-investment.

Crude prices are up 9% this year and have hovered around $90 per barrel for about two months. Energy prices spiked sharply immediately after Russia invaded Ukraine in early 2022.

Chevron said Monday that the acquisition of Hess adds a major oil field in Guyana as well as shale properties in the Bakken Formation in North Dakota. Guyana is a South American country of 791,000 people that is poised to become the world’s fourth-largest offshore oil producer, placing it ahead of Qatar, the U.S., Mexico and Norway.

It has become a major producer in recent years, with oil giants, including Exxon Mobil, China’s CNOOC, and Hess, squared off in a heated competition for highly lucrative oil fields in northern South America.

Chevron is paying for Hess with stock. Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. Including debt, Chevron valued the deal at $60 billion.

Shares of Chevron Corp., based in San Ramon, California, declined more than 3% before the opening bell Monday. The share of Hess Corp., based in New York City, rose slightly.

RBC analysts said they were surprised by the deal timing and had expected the company to bide its time after Exxon’s mega-deal for Pioneer.

Chevron said the deal will help to increase the amount of cash given back to shareholders. The company anticipates that it will be able to recommend boosting its first quarter dividend by 8% to $1.63 in January. This would still need board approval. The company also expects to increase stock buybacks by $2.5 billion to the top end of its guidance range of $20 billion per year once the transaction closes.

The deal arrives a month after unions ended disruptive strike actions at Chevron’s three liquefied natural gas (LNG) plants in Australia that provide more than 5% of global LNG supplies.

The boards of both companies have approved the Hess deal, which is targeted to close in the first half of next year. It still needs approval by Hess shareholders. The company’s CEO, John Hess, is expected to join Chevron’s board. His family owns a large chunk of Hess.

Goldman Sachs was the lead adviser to Hess, while Morgan Stanley was the lead adviser to Chevron.