CORPUS CHRISTI – As COVID-19 continues to affect the economy, the oil and gas industry has shown that it isn’t immune to the pandemic.
With prices finally showing signs of recovery, it may be too little too late for some companies, but that may not be a bad thing for others.
Chevron Corporation announced on July 20 that it has entered into a definitive agreement with Noble Energy, Inc. to acquire all of the outstanding shares in an all-stock transaction valued at $5 billion, or $10.38 per share. Based on Chevron’s closing price on July 17, and under the terms of the agreement, Noble Energy shareholders will receive 0.1191 shares of Chevron for each Noble Energy share. The total enterprise value, including debt, of the transaction is $13 billion.
In a press release from Chevron, it stated that the acquisition of Noble Energy provides Chevron with low-cost, proven reserves and attractive undeveloped resources that will enhance an already advantaged upstream portfolio. 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 Denver- Julesburg Basin and 92,000 largely contiguous and adjacent acres in the Permian Basin.
“It’s perhaps a sign of the time,” Chevron Chairman and CEO Michael Wirth said. “The industry is feeling the pressure of the pandemic as the (Texas Gov. Greg Abbott) mentioned and yet at the same time, we’re looking to meet these challenges of the future.
“We were in a position with a strong balance sheet to look for opportunities to work with others in the industry to strengthen our ability to weather the uncertain times that we’re in today. And, we also set ourselves up to be an even stronger supplier of energy into the future.
“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 by saying that the discussions with Noble Energy allowed Chevron to bring the two companies together which he thinks is a good fit for the shareholders of both companies because they have some fine assets and terrific people.
He added that he thinks by Noble being a part of Chevron, they can offer the balance sheet strength to support their assets through a tough period of time and provide opportunities for their people, as Chevron has a large global footprint and needs talented people to continue to move into the future.
“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,” Noble Energy Chairman and CEO David Stover said. “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.”
Wirth continued by saying the deal is a pretty straightforward from a regulatory standpoint, and the plan is to close it early in the fourth quarter of 2020.
Paul Gonzales is a reporter at The News of San Patricio and can be reached at 361-364-1270, or by email at firstname.lastname@example.org.