Chevron has struck a deal to buy Noble Energy for $5 billion, which will be paid in an all-stock transaction.
Including debt, the total value of the deal rises to $13bn. Chevron said the deal would provide it with low-cost proved reserves and an advantaged upstream portfolio.
In particular, the super-major picked out cash-generating assets in Israel, which will strengthen Chevron’s position in the Eastern Mediterranean, it said. Noble also has acreage in the DJ and Permian basins, onshore in the US.
“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 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 organisations.”
Adding it up
Cost synergies from the deal should provide around $300 million before tax. Chevron should see benefits a year after closing, Wirth said, based on a Brent price of $40 per barrel.
Noble’s chairman and CEO David Stover said the deal was a “compelling opportunity to join an admired global, diversified energy leader with a top-tier balance sheet and strong shareholder returns”.
Chevron said the addition of Noble’s reserves would add around 18% to its end of 2019 figures. The cost is less than $5 per proved barrel of oil equivalent, while almost 7 billion barrels of risked resources come at less than $1.5 per boe.
Noble also has assets offshore Equatorial Guinea. The statement from Chevron said there were “further growth opportunities” there.
Acquiring Noble gives Chevron “high-quality, long-life assets with a gas-focused international portfolio offshore Israel at Leviathan and Equatorial Guinea at Alen. In Leviathan, Chevron gains an operated, long-life, increasing production profile, which builds on Chevron’s Eastern Mediterranean exploration blocks in Egypt and Cyprus,” said Gneiss Energy’s corporate finance director Paul Weidman.
Chevron also receives a liquids-weighted 270,000 boepd portfolio onshore in the US, in the Permian Basin. This “is largely contiguous to its current position, the Eagle Ford, and a new position in the DJ Basin”, Weidman said.
“The all-share consideration continues an increasing trend of consolidation via share acquisitions, with a view to conserving the balance sheet, maintaining liquidity and eliminating duplicate costs, which Chevron estimates at $300 million per year.”
Wood Mackenzie’s senior vice president of corporate analysis Tom Ellacott said this deal was the first large 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.
“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.”
Crown jewel
Woodmac’s upstream researcher Jean-Baptiste Bouzard described Noble’s stake in Israel as 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.”
Bouzard also noted that both Chevron and Noble had both recently entered Egypt’s upstream, with frontier exploration acreage in the offshore Herodotus basin.
Updated at 1:49 pm with comments from Gneiss’ Weidman and Woodmac’s Ellacott and Bouzard.
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