Chevron to buy Noble Energy in $5bn deal

Chevron has agreed to buy Noble Energy in an all-share deal valued at $5bn, or $10.38 per share.

Under the terms of the transaction, Noble Energy shareholders will receive 0.1191 Chevron shares for each of their shares. The total enterprise value, including debt, is $13bn.

Chevron said the deal provides it with "low-cost, proved 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," it said.

Chevron said the transaction - which is due to close in the fourth quarter of this year - is expected to achieve run-rate operating and other cost synergies of $300m before tax within a year of closing. In addition, it’s expected to be accretive to return on capital employed, free cash flow and earnings per share one year after closing.

Chevron chairman and chief executive officer Michael Wirth said: "Our strong balance sheet and financial discipline gives us the flexibility to be a buyer of quality assets during these challenging times.

"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."

Oanda analyst Edward Moya said: "This is likely the first of many deals to be done as US energy companies will need to consolidate even further. The deal made a lot of sense for Chevron as it is very cost effective and it improves their position with US shale oil.

"This major deal will be the first domino to fall in what should be the beginning of a massive consolidation in the energy sector. Covid-19 has put a permanent cap with oil prices as demand won’t return until a vaccine is fully in place. Many of the smaller companies can’t survive in this environment and the incentive to make a deal will grow."