Chevron agreed to buy Noble Energy for about $5 billion (Dh18.3bn) in shares as the oil giant looks to beef up amid the wreckage of the worst-ever crude crash.
The takeover is the industry’s first major deal since the coronavirus triggered a severe slump and the largest since Occidental Petroleum acquired Anadarko Petroleum last year.
The deal will grow Chevron’s shale presence in both the Denver-Julesburg Basin of Colorado and the Permian Basin, which was once the heartland of the US shale boom but is now experiencing a sharp reduction in drilling. It will increase the company’s proved reserves, as reported at the end of 2019, by about 18 per cent. The deal also strengthens Chevron’s stake in the Eastern Mediterranean.
“Our strong balance sheet and financial discipline gives us the flexibility to be a buyer of quality assets during these challenging times,” Chevron chief executive Michael Wirth said in a statement Monday. “This is a cost-effective opportunity for Chevron to acquire additional proved reserves and resources.”
Consolidation in the shale patch has been largely non-existent this year as the combination of a severe oil-price slump and pressure on companies from investors to return cash leaves explorers with little remaining firepower to make deals. Energy mergers and acquisitions activity so far this year totals about $122bn, according to data compiled by Bloomberg, down by almost two-thirds year on year.
Last year, Chevron lost a takeover battle for Anadarko. Occidental won with a higher bid, but has subsequently struggled with the large debt pile resulting from that deal.
After Anadarko, Noble was among the top four potential candidates that Chevron could have gone after as it closely resembled Anadarko’s portfolio at a smaller scale, Bob Brackett, an analyst at Bernstein, said Monday in a note to investors.
“We still don’t embrace the Permian M&A theme as a money maker,” Mr Brackett wrote.
Investors will get 0.1191 of a Chevron share for each Noble share. That’s equivalent to $10.38 a share, or a 7.5% premium over Friday’s closing price.
The total enterprise value of the deal is $13bn.
The transaction is expected to close in the fourth quarter, subject to regulatory approvals.