By TAYO ELEGBEDE
Chevron Corporation (NYSE: CVX) disclosed Monday morning of a definitive agreement with Noble Energy, Inc. (NASDAQ: NBL) to acquire all of its outstanding shares in an all-stock transaction valued at $5 billion, or $10.38 per share.
It says based on Chevron’s closing price on July 17, 2020 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.
The Company noted in a press release that the acquisition of Noble Energy will provide Chevron with low-cost, proved reserves and attractive undeveloped resources that will enhance an already advantaged upstream portfolio, adding that Noble Energy brings low-capital, cash-generating offshore assets in Israel, strengthening Chevron’s position in the Eastern Mediterranean.
Noble Energy is an independent oil and natural gas exploration and production company committed to meeting the world’s growing energy needs and delivering leading returns to shareholders.
The Company, which was founded 85 years ago operates a high-quality portfolio of assets onshore in the United States and offshore in the Eastern Mediterranean and off the west coast of Africa.
The release further remarked that Noble Energy will also enhance 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.
Chairman and Chief Executive Officer of Chevron, Michael Wirth said the Company’s strong balance sheet and financial discipline gives them 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.”
They said the acquisition consideration is structured with 100 percent stock utilising Chevron’s attractive equity currency while maintaining a strong balance sheet.
In aggregate, upon closing of the transaction, Chevron will issue approximately 58 million shares of stock, total enterprise value of $13 billion includes net debt and book value of non-controlling interest.
The transaction they furthered had been unanimously approved by the Boards of Directors of both companies and is expected to close in the fourth quarter of 2020 and that the acquisition is subject to Noble Energy shareholder approval, as well as subject to regulatory approvals and other customary closing conditions.
The transaction price represents a premium of nearly 12% on a 10-day average based on closing stock prices on July 17, 2020 following closing of the transaction, Noble Energy shareholders will own approximately 3% of the combined company.
Chevron was pleased that Noble Energy’s multi-asset, high-quality portfolio will enhance geographic diversity, increase capital flexibility, and improve their 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,” the Company stated.
“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 concluded.
Noble Energy’s Chairman and CEO, David Stover maintained 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, adding that
“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 maximise 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,” Stover said.