Chevron has agreed to buy Noble Energy for $13 billion including debt in the oil and gas industry's first big deal since geopolitical tensions and the global pandemic sparked this year's crude prices collapse.
Under the terms of the all-share tie-up, which values the independent oil and gas producer’s equity at $5 billion, investors will receive 0.1191 shares in the supermajor for each one they hold in its smaller US rival.
The acquisition is expected to trigger a string of deals in the oil sector as deep-pocketed groups such as Chevron and ExxonMobil lead a wave of consolidation across the heavily-indebted US shale patch.
Vitol, the world's largest independent oil trader announced on Monday it was establishing a US oil production business called Vencer Energy, looking to acquire "mature, producing oil and gas assets".
"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 chief executive Michael Wirth. "This is a cost-effective opportunity for Chevron to acquire additional proved reserves and resources."
The purchase of the independent oil and gas producer fits with Chevron’s strategic plan to focus on the international natural gas business and US shale production.
The company is already one of the world’s largest natural gas producers. The new deal significantly expands its position in the eastern Mediterranean, where several countries are racing to develop the region’s huge gas reserves for export.
It also gives Israel’s energy sector the supermajor investor – with political clout – that its government has craved since Noble began finding huge offshore gas reserves there more than 20 years ago.
Mediterranean assets
Chevron will now become the operator of the giant Leviathan field and take over Noble's other Mediterranean assets, including in Cyprus.
The deal comes despite the company's wider investments in the Middle East, where it has a leading role in the Neutral Zone shared between Saudi Arabia and Kuwait, and a position in Iraq.
Total chief executive Patrick Pouyanné said last year that Israel was too "complex" a market to invest in because of his company's assets elsewhere in the region.
The deal also significantly expands US Chevron’s shale position, including in Texas’s Permian, the world’s most prolific oilfield, where it said Noble’s acreage would be contiguous with its own assets.
“We really like unconventionals,” said Mr Wirth, referring to the addition of Noble’s US shale oil assets. “This gives us another piston in the unconventional engine.”
Chevron said it was buying “low-capital, cash-generating offshore assets” as well as “de-risked acreage” in the US, adding that the deal would generate “run-rate cost synergies of approximately $300 million”, and be “accretive to free cash flow, earnings, and book returns one year after close”.
The acquisition will increase Chevron's total reserves base by almost a fifth at a cost of less than $5 a barrel of oil equivalent, while offering further growth potential in west Africa, where Noble has a position in Equatorial Guinea.
Assets
Noble’s debt, included in the acquisition, amounts to almost $9 billion against assets currently valued at just over $17 billion, according to S&P Capital IQ.
Mr Wirth told the Financial Times in May that Chevron had an appetite for acquisitions, saying the group was “alert to opportunities” that had emerged because of the oil price crash.
Last year the company pulled out of a bidding war with Occidental Petroleum to buy Anadarko, another company that had international natural gas assets and a presence in the US shale sector. – Copyright The Financial Times Limited 2020
