Chevron Corp. has agreed to acquire all of the outstanding shares of Noble Energy Inc. in an all-stock transaction valued at $5 billion, or $10.38 per share. Based on Chevron’s closing price on July 17, and under the terms of the agreement, Noble shareholders will receive 0.1191 shares of Chevron for each Noble share. The total enterprise value, including debt, of the transaction is $13 billion.
The deal provides Chevron with low-cost, proved reserves and attractive undeveloped resources, strengthening its position in the Eastern Mediterranean and enhancing its US unconventional position with de-risked acreage in the Denver-Julesburg basin (DJ basin) and 92,000 largely contiguous and adjacent acres in the Permian basin, Chevron said.
The Noble portfolio includes “[about] 2 billion boe proved reserves primarily across the Permian, DJ basin, and Leviathan in Israel,” said Cowen and Company analysts in a July 20 investor note. Company-wide production in the second quarter was 350,000 boe/d, including 248,000 boe/d from its US onshore assets (50% oil, 11,000 b/d curtailed) and 50,000 boe/d from Equatorial Guinea, the analysts said. “The Leviathan and Tamar [offshore Israel] projects will generate combined [about] 100,000 boe/d at full production and gas weighting will increase from 42% to 55% from FY19 to FY22.”
In addition to the DJ basin and Permian basin assets in the US, the deal adds an integrated midstream business and an established position in the Eagle Ford shale.
Portfolio expansion
“Chevron was our top pick to lead bottom-of-the-cycle corporate consolidation arising from the oil price collapse and the COVID-19 pandemic,” said Tom Ellacott, senior vice-president, corporate analysis, at Wood Mackenzie.
“The move follows Chevron’s $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,” he said (OGJ Online, May 19, 2019).
Noble’s position in Israel, said Jean-Baptiste Bouzard, from WoodMac’s upstream research team, “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.”
Additionally, Bouzard said, both companies recently entered upstream Egypt, "with a focus on frontier exploration in the offshore Herodotus basin.”
In the US, 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 transaction is expected to close in this year’s fourth quarter, subject to Noble Energy shareholder approval, regulatory approvals, and other customary closing conditions.
Following closing of the transaction, Noble Energy shareholders will own about 3% of the combined company.