Chevron Agrees To $5 Billion Takeover Of Noble Energy


Chevron CEO Mike Wirth said that Noble’s assets have low operating costs and require little near-term investment.

According to The Wall Street Journal, Chevron “agreed to a deal to buy Noble Energy Inc. for about $5 billion, in what would be the largest oil-patch tie-up since the coronavirus pandemic delivered a shock to the industry.”

“The all-stock takeover values Noble at $10.38 a share or 0.1191 Chevron share,” reported The Journal. “Including Noble’s hefty debt load, the deal would be valued at roughly $13 billion.” Chevron Chief Executive Mike Wirth said “in an interview that Noble’s assets have low operating costs and require little near-term investment, preserving Chevron’s ability to navigate global economic uncertainty.”

“The downturn in energy prices and demand have put pressure on a lot of different companies in our industry,” Mr. Wirth said. “This is an opportunity to bring together two companies and have a stronger company, I think, coming out of it.”

Houston-based Noble is “an independent oil-and-gas producer with U.S. and international operations. Buying the company would expand Chevron’s presence in the DJ Basin of Colorado and Permian Basin, which spans West Texas and New Mexico,” The Journal wrote. “It would also give San Ramon, Calif.-based Chevron, which has a market value of $163 billion, assets in the eastern Mediterranean and West Africa and yield potential annual cost savings of $300 million.”

“Noble’s natural-gas projects in the eastern Mediterranean are also a key component of the deal,” the report continued. “Those assets will supply natural gas to Israel, Egypt and Jordan, and signal a long-term bet on gas demand by Chevron as countries shift away from coal-powered electric generation, according to Enverus.”

Chevron’s “planned $5 billion purchase is the largest U.S. energy M&A deal in 2020 thus far, according to Dealogic,” The Journal added. “The Chevron deal for Noble is one of the first signs of life in energy-sector deal-making since oil prices plummeted in March as a result of widespread shutdowns and travel bans.”

Wirth said “investors are clamoring for consolidation, but the industry needs responsible deal-making that can generate returns,” the report stated. “Despite a sizable war chest,” Wirth indicated that “Chevron is unlikely to go on a buying spree in the short-term and is instead focusing on an ongoing internal restructuring and integrating Noble.”

Read the full report here.


Economics, Finance and Investing