U.S. energy giant Chevron announced that it has entered into a definitive agreement to buy U.S. independent Noble Energy in a US$13 billion all-stock transaction, including US$5 billion in equity.
When the deal is closed, Chevron will issue approximately 58 million shares of stock. Total enterprise value of $13 billion includes net debt and book value of non-controlling interest.
The deal has been unanimously approved by the Boards of Directors of both companies and is expected to close in the fourth quarter of 2020.
In a statement, Chevron said that "the acquisition of Noble Energy provides it with low-cost, proved reserves and attractive undeveloped resources that will enhance an already advantaged upstream portfolio."
Noble Energy also enhances Chevron’s leading U.S. 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,” 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.”
“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,” Wirth concluded.
“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,” said David Stover, Noble Energy’s Chairman and CEO.
Tom Ellacott, senior vice president, corporate analysis, at Wood Mackenzie, said: “This is the first large-scale corporate acquisition of this 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.
Ellacott added: “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.”
Jean-Baptiste Bouzard, from WoodMac’s upstream research team, said: “It would be interesting to see if the acquisition boosts development plans for Noble’s Aphrodite discovery, offshore Cyprus. Both companies also recently entered upstream Egypt, with a focus on frontier exploration in the offshore Herodotus basin.”