Chevron Corporation announced today that it has entered into a definitive agreement with Noble Energy, Inc. to acquire all of the outstanding shares of Noble Energy in an all-stock transaction valued at $5Billion, or $10.38 per share.
Based on Chevron’s closing price on July 17, 2020 and under the terms of the agreement, Noble Energy shareholders will receive 0.1191 shares of Chevron for each Noble Energy share. The total enterprise value, including debt, of the transaction is $13Billion. The acquisition of Noble Energy provides Chevron with low-cost, proved reserves and attractive undeveloped resources that will enhance an already advantaged upstream portfolio.
The American major says that Noble Energy brings low-capital, cash generating offshore assets in Israel, strengthening Chevron’s position in the Eastern Mediterranean. 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. 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 organizations.”
Transaction Benefits, according to Chevron include:
- Low Cost Acquisition of Proved Reserves and Attractive Undeveloped Resource: Based on Noble Energy’s proved reserves at year-end 2019, this will add approximately 18 percent to Chevron’s year-end 2019 proved oil and gas reserves at an average acquisition cost of less than $5/boe, and almost 7Billion barrels of risked.
- Proved reserves to be acquired for under $5 per oil equivalent barrel
- Delivers $300 million in anticipated annual pre-tax synergies
- Accretive to ROCE, free cash flow and earnings.
“ 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. “Over the last few years, we have made significant progress executing our strategic objectives, including driving capital efficiency gains onshore, advancing our offshore conventional gas developments and significantly reducing our cost structure. As we looked to build on this positive momentum, the Noble Energy Board of Directors and management team conducted a thorough process and concluded that this transaction is the best way to maximize value for all Noble Energy shareholders. The release says that
Noble Energy’s assets will enhance Chevron’s portfolio in:
- U.S. onshore
- DJ Basin – New unconventional position with competitive returns that can be further developed leveraging Chevron’s proven factory-model approach.
- Permian Basin – Complementary acreage that enhances Chevron’s strong position in the Delaware Basin.
- Other – An integrated midstream business and an established position in the Eagle Ford.
- International o Israel – Large-scale, producing Eastern Mediterranean position that diversifies Chevron’s portfolio and is expected to generate strong returns and cash flow with low capital requirements.
- West Africa – Strong position in Equatorial Guinea with further growth opportunities.
Chevron anticipates the transaction to be accretive to ROCE, free cash flow and earnings per share one year after closing, at $40 Brent.
The acquisition consideration is structured with 100 percent stock utilizing Chevron’s attractive equity currency while maintaining a strong balance sheet. In aggregate, upon closing of the transaction, Chevron will issue approximately 58Million shares of stock. Total enterprise value of $13Billion includes net debt and book value of non-controlling interest.