Chevron Agrees To Acquire Noble Energy For $5 Billion In Stock

Chevron (CVX) said it agreed to buy independent oil and gas producer Noble Energy (NBL) in an all-stock transaction valued at $5 billion.

Under terms of the agreement, Noble Energy stockholders will receive 0.1191 of a share of Chevron stock for each Noble Energy share.

The agreement values Noble Energy stock at $10.38 per share, a 7.5% premium to Noble Energy’s shares’ Friday closing price.

The total enterprise value of the transaction, including debt, is $13 billion.

Upon completion of the transaction, Noble Energy’s oil and gas assets will increase the scope of Chevron’s operations in the Denver-Julesburg Basin of Colorado and the Permian Basin that stretches across West Texas and New Mexico.

Chevron will also receive Noble Energy’s assets in the eastern Mediterranean Sea and West Africa.

Overall, the transaction is expected to add 18% to Chevron's proven oil-and-gas reserves and result in about $300 million in annual cost-savings.

The Wall Street Journal said the merger will be the "largest oil-patch tie-up since the coronavirus pandemic delivered a shock to the industry."

Jim Cramer of CNBC tweeted: “Chevron once again distinguishes itself as the smartest oil company by coming in and scooping up Noble Energy for next to nothing.”

“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 CEO Michael Wirth. “This is a cost-effective opportunity for Chevron to acquire additional proved reserves and resources. Noble Energy’s multi-asset, high-quality portfolio will enhance geographic diversity, increase capital flexibility, and improve our ability to generate strong cash flow. These assets play to Chevron’s operational strengths, and the transaction underscores our commitment to capital discipline.”

David Stover, Noble Energy’s Chairman and CEO, stated: “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. 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.”

Chevron’s offer for Noble Energy came more than one year after it had to cancel a takeover bid for Anadarko Petroleum, which was eventually acquired by Occidental Petroleum (OXY).

Energy companies face a crisis as the COVID-19 pandemic has crushed demand for oil, sending prices ever lower. A number of oil firms, especially those involved in shale, have already gone bankrupt.