Chevron announced that it has entered into a definitive agreement with Noble Energy to acquire all of the outstanding shares of Noble Energy in an all-stock transaction valued at $5 billion, or $10.38 per share. Based on Chevron’s closing price on 17 July 2020 and under the terms of the agreement, Noble Energy shareholders will receive 0.1191 shares of Chevron for each Noble Energy share. The total enterprise value, including debt, of the transaction is $13 billion.
The acquisition of Noble Energy provides Chevron with low-cost, proved reserves and attractive undeveloped resources that will enhance an already advantaged upstream portfolio. Noble Energy brings low-capital, cash-generating offshore assets in Israel, strengthening Chevron’s position in the Eastern Mediterranean. Noble Energy also enhances Chevron’s US unconventional position with de-risked acreage in the DJ Basin and 92,000 largely contiguous and adjacent acres in the Permian Basin.
“Our strong balance sheet and financial discipline gives us the flexibility to be a buyer of quality assets during these challenging times,” Michael Wirth, Chevron Chairman and CEO, said. “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. These assets play to Chevron’s operational strengths, and the transaction underscores our commitment to capital discipline. We look forward to welcoming the Noble Energy team and shareholders to bring together the best of our organizations.”
“This combination is expected to unlock value for shareholders, generating anticipated annual run-rate cost synergies of approximately $300 million before tax, and it is expected to be accretive to free cash flow, earnings, and book returns one year after close,” Mr Wirth added.
Commenting on the acquisition plans, Tom Ellacott, Senior Vice President, Corporate Analysis, at Wood Mackenzie, said: “The move follows Chevron’s US$50 billion bid for Anadarko in April 2019. Although of a smaller scale, the acquisition of Noble will go further in reducing the concentration of Chevron’s upstream portfolio around core anchor positions in the Permian, Australian LNG, Kazakhstan and the US Gulf of Mexico.”
Jean-Baptiste Bouzard, from WoodMac’s upstream research team, said: “Noble’s position in Israel is the company’s crown jewel. 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. Much of Noble’s upstream value comes from its positions in Israel and Cyprus. It would be interesting to see if the acquisition boosts development plans for Noble’s Aphrodite discovery, offshore Cyprus, as well as ramping up production from its flagship assets in Israel, Tamar and Leviathan.”
Mr Bouzard added: “Both companies also recently entered upstream Egypt, with a focus on frontier exploration in the offshore Herodotus basin.”
Mr Ellacott said: “Noble’s portfolio in the DJ basin will add a new play to Chevron’s US unconventional portfolio. It also provides complementary Permian acreage that will enhance Chevron’s strong position in the Delaware basin.”
“The combination with Chevron is a compelling opportunity to join an admired global, diversified energy leader with a top-tier balance sheet and strong shareholder returns,” David Stover, Noble Energy’s Chairman and CEO, said. “Over the last few years, we have made significant progress executing our strategic objectives, including driving capital efficiency gains onshore, advancing our offshore conventional gas developments and significantly reducing our cost structure. As we looked to build on this positive momentum, the Noble Energy Board of Directors and management team conducted a thorough process and concluded that this transaction is the best way to maximize value for all Noble Energy shareholders. We look forward to bringing together our highly complementary cultures and teams to realize the long-term value and benefits that this combination will deliver.”