SAN RAMON, CALIF. — Chevron Corp. (NYSE: CVX) has agreed to acquire Houston-based exploration firm Noble Energy (NASDAQ: NBL) in an all-stock transaction valued at $5 billion, or $10.38 per share.
Under the terms of the agreement, Noble Energy shareholders will receive 0.1191 shares of Chevron common stock for each share of Noble Energy stock they own. Inclusive of debt, the deal carries a total enterprise value of $13 billion.
The price represents a premium of roughly 12 percent on the weighted average of Noble Energy’s closing stock prices for the 10-day period ending July 17. Following the closing of the deal, which is expected to occur in the fourth quarter, Noble’s shareholders will own about 3 percent of the new entity.
Executives at San Ramon, Calif.-based Chevron cited access to Noble’s assets in key domestic production sites like Colorado’s D-J Basin and Texas’ Permian Basin, as well as its international facilities in Israel and West Africa, as major incentives behind the acquisition.
For example, Noble’s portfolio includes nearly 92,000 contiguous acres for drilling and exploration in the Permian Basin . In addition, in June, the company was awarded exploration rights to 800,000 acres of drillable land in the Western Desert area of Egypt.
Chevron, whose holdings in the Permian Basin total approximately 2.2 million acres, closed several of its rigs in the region in May when oil supply gluts and lack of storage space caused demand to dry up and prices to temporarily descend into negative territory. The price of West Texas Intermediate, the benchmark rate for domestic oil prices, stood at $40.59 per barrel on Monday, July 20. For comparison, the price was $53.38 on February 24, before the full effects of the COVID-19 pandemic.
“Our strong balance sheet and financial discipline gives us the flexibility to be a buyer of quality assets during these challenging times,” says Michael Wirth, Chevron chairman and CEO. “Noble Energy’s multi-asset, high-quality portfolio will enhance geographic diversity, increase capital flexibility and improve our ability to generate strong cash flow.”
Credit Suisse Securities (USA) LLC is acting as financial advisor to Chevron. Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal advisor to Chevron. J.P. Morgan Securities LLC is acting as financial advisor to Noble Energy. Vinson & Elkins LLP is acting as legal advisor to Noble Energy.
Chevron’s stock price opened at $86.83 per share on Monday, July 20, down from $125.37 per share a year ago. Noble Energy’s stock price opened at $10.21 per share, down from $21.26 per share in July 2020.
— Taylor Williams