Chevron acquires Noble for $5 billion
Professor calls move ‘1st wave of acquisitions’
NEW YORK – Chevron will take over Noble Energy for $5 billion in the first big deal announced since the coronavirus pandemic shook the energy sector.
Chevron has been shopping for assets since last year and with crude prices down more than 30% this year, it jumped Monday with its all-stock offering for the independent Houston oil and gas driller.
Based on Chevron’s closing price on Friday, Noble Energy shareholders will receive 0.1191 shares of Chevron for each Noble Energy share. But with the list price comes a lot of debt.
Energy companies had been taking on enormous debt even before the pandemic with energy prices have bouncing all over the place. Noble is no exception.
The total enterprise value of the deal is $13 billion, with Chevron assuming Noble’s debt.
Other big players, seeking to cut costs and load up on assets, will likely follow Chevron’s lead, said Gianna Bern, a finance professor at the University of Notre Dame’s Mendoza College of Business.
“This is the first wave of acquisitions,” Bern said.
Last year, as it pursued potential buyout targets, Chevron lost out when Occidental Petroleum made a $38 billion deal for one of them, Anadarko, even though Chevron is five times the size of Occidental.
While Occidental’s valuable holdings in the Permian Basin of west Texas and New Mexico appeared to be a good match, Chevron said at the time that it favored discipline over “winning at any cost.”
It’s found another match in Noble Energy.
The acquisition brings to Chevron low-cost, proven reserves in addition to cash-generating offshore assets in Israel, strengthening the company’s position in the Mediterranean. Noble’s portfolio will also add to Chevron’s U.S. acreage in the Permian Basin and in Colorado’s DJ Basin.
“Noble Energy’s multi-asset, highquality portfolio will enhance geographic diversity, increase capital flexibility and improve our ability to generate strong cash flow,” said Chevron Chairman and CEO Michael Wirth. “These assets play to Chevron’s operational strengths, and the transaction underscores our commitment to capital discipline.”
That discipline is mandatory for any energy sector company this year.
On Monday, energy services company Halliburton reported a quarterly loss of $1.7 billion, and that was better than industry analysts had expected. The 57% plunge in revenue was not.
Energy demand has bounced back as economies reopen globally. U.S. crude prices that fell for first four months of the year are gaining ground, and have been positive since May.
Shares in Noble rose 5% Monday, but crude was weak, heading closer to $40 per barrel.