Chevron Corporation, the multinational energy firm, said Monday it had entered into a definitive agreement with Noble Energy, Inc. to buy all of the outstanding shares of the Houston, Texas-based oil and gas explorer, in an all-stock transaction valued at $5 billion, or $10.38 per share.
The deal was first reported by the Wall Street Journal on Monday.
Noble Energy has stakes in Israel’s mammoth gas fields Tamar and Leviathan.
Israel’s Energy Minister Yuval Steinitz said in a text message that he welcomed the acquisition and the entry of Chevron to the Israeli energy market.
“The acquisition of Noble Energy by the energy giant Chevron is a tremendous expression of confidence in the Israeli energy economy, and in the continued development and export of natural gas from the State of Israel,” he said, adding that the energy ministry will examine the request for the transfer of ownership of the rights to the fields once it is submitted to the ministry. By Israeli law, the rights to energy fields cannot be transferred without approval of Israel’s petroleum council.
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 value of the deal, including debt, is $13 billion, Chevron said. The price of the deal represents a 7.6 percent premium to Noble’s closing price on Friday of $9.65.
The acquisition makes it the largest tie-up in the oil industry since the start of the coronavirus pandemic that triggered a plunge in prices in the industry, the Wall Street Journal said.
The acquisition of Noble Energy provides Chevron with “low-cost, proved reserves and attractive undeveloped resources that will enhance an already advantaged upstream portfolio,” Chevron said in the statement. “Noble Energy brings low-capital, cash-generating offshore assets in Israel, strengthening Chevron’s position in the Eastern Mediterranean.”
The deal will also enhance Chevron’s position in the US.
“Our strong balance sheet and financial discipline gives us the flexibility to be a buyer of quality assets during these challenging times,” said Chevron Chairman and CEO Michael Wirth in the statement. “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.”
Noble Energy has a portfolio of assets that include wells offshore in the Eastern Mediterranean, off the west coast of Africa and onshore in the US. At the end of 2019, the firm had proved reserves of 2.05 billion barrels of oil equivalent, according to its website.
Noble Energy, which had revenues of $4.44 billion in 2019, started production of natural gas from the Leviathan field, the firm’s largest discovery to date, in December 2019. The firm has a 39.66% stake in the field, and is partners in the site with Ratio Oil Exploration (1992) LP., which holds a 15% stake and Delek Drilling LP , with a 45.43% stake.
Noble also has stakes in the the nearby Tamar field, which started producing gas in 2013 and has been supplying Israel with the fuel. Tamar holds some 10 trillion cubic feet (tcf) of natural gas, half of the amount held in Leviathan. Noble also has a stake in the Dalit field offshore Israel.
The shares of Ratio were trading almost 15% higher on the Tel Aviv Stock Exchange at 2.18pm in Tel Aviv. The shares of Delek Drilling were up 12%.
“It doesn’t physically change anything, but the sentiment is good,” said Saar Golan, a trader at Bank Leumi Le-Israel in a phone interview. The new owner of the Israeli fields has a market cap of $163 billion as opposed to the $4.6 billion of Noble. “It puts the Israeli assets in stronger, more stable hands,” he 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,” said David Stover, Noble Energy’s Chairman and CEO.
Noble’s large-scale, producing Eastern Mediterranean position “is expected to generate strong returns and cash flow with low capital requirements,” Chevron said in the statement.
The transaction is expected to achieve cost synergies of $300 million before-tax within a year of closing, the statement said.