Chevron to Buy Noble Energy for $5bn: Update
(adds WoodMac comment at end)
Chevron has struck a deal to acquire Houston-based producer Noble Energy for $5bn, in a bid to build up its US unconventionals position and expand in the east Mediterranean.
In an all-stock transaction, Noble's shareholders will receive 0.1191 shares in Chevron for each share in Noble. This values Noble's stock at $10.38/share, or around a modest 7.5% premium to the closing price on July 17. Including Noble's debt, the deal is worth around $13bn.
By taking over Noble, Chevron will expand in the Denver-Julesburg basin in Colorado and the Permian basin covering West Texas and New Mexico, and gain additional assets in the Eagle Ford basin in Texas. The US major will also acquire operations in Colombia, off West Africa and in Israel and Cyprus. Noble has been producing gas from Israel's giant offshore Leviathan field since January.
Chevron expects to save $300mn in annual costs due to synergies created by the move. The deal comes over a year after the major failed to buy another Texan producer Anadarko, after being outbid by Occidental Petroleum.
"Our strong balance sheet and financial discipline gives us the flexibility to be a buyer of quality assets during these challenging times,” Chevron CEO Michael Wirth said in a statement. "This is a cost-effective opportunity for Chevron to acquire additional proved reserves and resources. Noble Energy’s multi-asset, high-quality portfolio will enhance geographic diversity, increase capital flexibility, and improve our ability to generate strong cash flow."
US shale producers were struggling with debt even before the coronavirus pandemic, and the crisis has pushed some major players, such as Denver-based Whiting Petroleum, over the edge. Remaining producers have seen their assets lose significant value due to the oil price collapse, although this has presented opportunities to buyers.
Chevron's takeover of Noble marks the first large-scale corporate acquisition of the downturn.
"Chevron was our top pick to lead bottom-of-the-cycle corporate consolidation arising from the oil price collapse and the Covid-19 pandemic," Wood Mackenzie vice president Tom Ellacott commented in a research note.
"Noble’s position in Israel is the company’s crown jewel," WoodMac analyst Jean-Baptiste Bouzard added. "Israel will provide Chevron with a new core international geography that will rebalance the portfolio towards gas and provide a springboard to capture further upside potential in the region."