Chevron Corp. expects to close on a $5 billion deal to acquire Noble Energy, Inc. by the end of this year.
In the largest oil and gas deal since the coronavirus pandemic hit in March and the oil price crashed below zero in April, Chevron officials announced Monday the company has entered into a definitive agreement with Noble to acquire all of the outstanding shares of Noble Energy in an all-stock transaction valued at $5 billion, or $10.38 per share.
Based on Chevron’s closing price on Friday 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 of the transaction is $13 billion, including Noble’s debt of $8 billion.
The Houston-based independent company began in 1932 as Samedan Oil Corp., an explorer of crude oil and natural gas, founded by Lloyd Noble in southern Oklahoma.
Noble’s properties include 92,000 acres of the Delaware Basin part of the Permian Basin straddling the Texas-New Mexico border, with significant assets in southeastern Lea County. Those assets are adjacent to and contiguous with Chevron properties in the area.
Other U.S. on-shore properties of Noble Energy are in Colorado’s DJ Basin and the Eagle Ford Basin in south Texas. Off shore assets are in the eastern Mediterranean near Israel and western Africa.
The acquisition of Noble Energy also brings to Chevron low-cost, proven reserves in addition to cash-generating offshore assets in Israel, strengthening the company’s position in the Mediterranean, as well as offshore assets in Western Africa.
“Noble Energy’s multi-asset, high-quality portfolio will enhance geographic diversity, increase capital flexibility, and improve our ability to generate strong cash flow,” said Chevron Chairman and CEO Michael Wirth in a news release. “These assets play to Chevron’s operational strengths, and the transaction underscores our commitment to capital discipline.”
According to Chevron’s news release, the transaction was unanimously approved by the boards of directors of both companies and is expected to close in the fourth quarter of 2020.
The acquisition is subject to Noble Energy shareholder approval. It is also subject to regulatory approvals and other customary closing conditions.
The transaction price represents a premium of nearly 12 percent on a 10-day average based on closing stock prices on Friday. Following closing of the transaction, Noble Energy shareholders will own approximately three percent of the combined company.
“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,” Stover continued. “We look forward to bringing together our highly complementary cultures and teams to realize the long-term value and benefits that this combination will deliver.”
The transaction is expected to achieve potential cost savings of $300 million before-tax within a year of closing, the Chevron news release stated.