Chevron snaps up Noble in first big deal since oil price slumped
CHEVRON has agreed to buy Noble Energy for $13bn (£10.3bn) in the oil industry’s first big deal since the coronavirus crisis sent the price of crude plummeting.
The tie-up values Houston-based oil and gas producer Noble at about $5bn, excluding an $8bn debt mountain.
The deal is expected to broaden Chevron’s reach into a valuable drilling region spanning West Texas and New Mexico, known as the Permian Basin.
Chevron said it would seek to slash costs by $300m a year following the allstock acquisition.
Tom Ellacott, of energy consultant Wood Mackenzie, said: “This is the first large-scale corporate acquisition of this downturn.”
The deal comes a year after Chevron’s failed attempt to acquire rival Anadarko for $50bn. It lost out to Occidental Petroleum, which has suffered this year under the weight of the debt it took on from that takeover. Mr Ellacott said: “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.”
Chevron shares fell in New York following the announcement. Analysts had predicted that Chevron was likely to use its financial firepower to snap up smaller companies during the crisis.
Anish Kapadia, head of Londonbased independent oil and mining advisory group Palissy Advisors, said Chevron was making the most of its strong performance relative to smaller US oil companies. Some 20 North American oil producers have filed for bankruptcy this year according to the law firm Haynes & Boone. Firms focused on shale gas extraction are not viable when oil prices are below $50, and the international benchmark Brent crude is currently worth around $43 a barrel.
Dozens more US producers are expected to collapse if prices do not rebound. The industry’s fragility was highlighted yesterday when former stock market darling Halliburton posted crippling losses.
The oil services company lost $1.7bn in the second quarter, compared with a $75m profit for the same quarter last year. As demand was wiped out by lockdown restrictions and travel bans in the first half of this year, Halliburton wrote down the value of its assets by $2.1bn this quarter.
It had already taken writedowns of $1.1bn in the first quarter as the price war between Saudi Arabia and Russia sent oil crashing to historic lows.