Chevron Scoops Up Noble Energy in $5-Billion Deal
Chevron strengthens its North American position with assets in the Permian, DJ, and Eagle Ford basins and offshore in Israel and West Africa.
Chevron announced that it will purchase all outstanding shares of independent producer Noble Energy in an all-stock transaction valued at $5 billion. Including Noble's debt, the deal is valued at about $13 billion.
The deal strengthens Chevron’s position in the Permian Basin with about 92,000 largely contiguous acres near its own assets in the region. Noble's offshore assets in Israel, including the Leviathan field, the largest natural gas field in the eastern Mediterranean, and Equatorial Guinea, add to Chevron’s strength in those regions. Chevron also picks up land in the DJ Basin and Eagle Ford and an integrated midstream business through its stake in Noble Midstream.
“Our strong balance sheet and financial discipline gives us the flexibility to be a buyer of quality assets during these challenging times,” said Chevron Chairman and CEO Michael Wirth. “This is a cost-effective opportunity for Chevron to acquire additional proved reserves and resources.
Noble Energy’s multiasset, high-quality portfolio will enhance geographic diversity, increase capital flexibility, and improve our ability to generate strong cash flow. These assets play to Chevron’s operational strengths, and the transaction underscores our commitment to capital discipline.”
Buying Noble is Chevron's first major strategic move after exiting the bidding war for Anadarko Petroleum in 2019. It is paying less than $5.00/BOE for Noble's proven oil and gas reserves and less than $1.50/BOE for its resource base of 7 billion BOE, according Chevron.
The transaction is expected to close in Q4 2020, subject to Noble Energy shareholder approval and regulatory approvals.
Andrew Ditmar, a senior mergers and acquisition analyst with Enverus, noted that oil consolation deals were few and far between entering into 2020 and that the COVID-19 pandemic further suppressed appetites. “However, it also created potential opportunities down the back half of the year and less than one month into Q3 we have our first major acquisition,” he said.
“This deal lays out the blueprint for what post-COVID consolidation will likely need to look like with all-stock consideration, a moderate premium, and asset fit and synergies that are an easy and natural story to tell investors,” added Ditmar. “This could certainly ignite a wave of additional consolidation, although that is by no means certain as we saw with not many majors deals after the Anadarko takeover. While potential targets may be more plentiful, there aren’t that many companies with Chevron’s balance sheet strength and investor support to make up a buyer base.”