Oil bust acquisition: Chevron to buy Noble Energy in $5bn deal

Chevron Corp said on Monday that it would buy Noble Energy Inc in a five-billion-dollar, all-stock deal, bolstering its shale presence as a plunge in crude prices have made assets cheaper.

The deal, the largest in the US energy sector this year, comes more than a year after Chevron abandoned its offer for Anadarko Petroleum Corp, outmanoeuvred by Occidental Petroleum Corp’s higher bid.

Oil prices plunged to historic lows in April as the coronavirus crisis decimated demand. While prices have recovered from their lows, they remain depressed, making assets cheaper, as a new surge of COVID-19 cases threatens to stall recovery.

“Chevron [is] taking advantage of its strong relative performance versus the US exploration and production companies and capitalising on the downturn to buy into some high-quality assets,” said Anish Kapadia, head of London-based independent oil and mining advisory Palissy Advisors.

The deal will also give Chevron access to Noble’s flagship Leviathan field, the largest natural gas field in the Eastern Mediterranean, which began producing natural gas late last year.

Shares of Noble were up 7.6 percent early trading in New York, while Chevron shares were off a little less than 1 percent. 

The offer values Noble at $10.38 a share or 0.12 Chevron share, a 7.5 percent premium to Noble’s Friday close. The deal would value Noble at roughly $13bn, including debt.

Noble’s assets will expand Chevron’s presence in the DJ Basin of Colorado and the Permian Basin across West Texas and New Mexico. The deal would yield potential annual cost savings of $300m.

Noble shareholders will own about 3 percent of the combined company.

The deal will add to Chevron’s free cash flow and earnings per share one year after closing, at $40 Brent, Chevron said.

Chevron had walked away with a billion-dollar fee after Occidental clinched a deal last May to buy Anadarko for $38bn.