The acquisition of Noble provides Chevron with low-cost, proved reserves and attractive undeveloped resources that will enhance an already advantaged upstream portfolio, Chevron said in a press release announcing the agreement. Noble Energy brings low-capital, cash-generating offshore assets in Israel, strengthening Chevron’s position in the Eastern Mediterranean. Noble Energy also enhances Chevron’s leading U.S. unconventional position with de-risked acreage in the DJ Basin and 92,000 largely contiguous and adjacent acres in the Permian Basin, Chevron said.
“Our strong balance sheet and financial discipline gives us the flexibility to be a buyer of quality assets during these challenging times,” Chevron Chairman and CEO Michael Wirth, said in a statement. “This is a cost-effective opportunity for Chevron to acquire additional proved reserves and resources. Noble Energy’s multiasset, 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. We look forward to welcoming the Noble Energy team and shareholders to bring together the best of our organizations.
“This combination is expected to unlock value for shareholders, generating anticipated annual run-rate cost synergies of approximately $300 million before tax, and it is expected to be accretive to free cash flow, earnings, and book returns one year after close,” Wirth continued.
“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,” David Stover, Noble Energy’s chairman and CEO, said in a statement. “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. As we looked to build on this positive momentum, the Noble Energy Board of Directors and management team conducted a thorough process and concluded that this transaction is the best way to maximize value for all Noble Energy shareholders. We look forward to bringing together our highly complementary cultures and teams to realize the long-term value and benefits that this combination will deliver.”
The acquisition consideration is structured with 100% stock utilizing Chevron’s attractive equity currency while maintaining a strong balance sheet, Chevron said. In aggregate, upon closing of the transaction, Chevron will issue approximately 58 million shares of stock. Total enterprise value of $13 billion includes the net debt and book value of non-controlling interest.
The transaction is expected to close in the fourth quarter of 2020. The acquisition is subject to Noble Energy shareholder approval. It is also subject to regulatory approvals and other customary closing conditions.
The transaction price represents a premium of nearly 12% on a 10-day basis based on the closing stock price on July 17, 2020. Following closing of the transaction, Noble Energy shareholders will own approximately 3% of the combined company.