CVX To Buy Noble Energy: All Stock Deal; $13 BIllion -- July 20, 2020

Updates

July 21, 2020: This may be the best analysis yet of this deal. It's a huge deal. Link here at Rigzone.

According to Chevron, the acquisition will add approximately 18 percent to its year-end 2019 proved oil and gas reserves at an average acquisition cost of less than $5 per barrel of oil equivalent (boe) and nearly 7 billion barrels of risked resources for less than $1.50 per boe. The figures are based on Noble’s proved reserves at the end of 2019, Chevron added.

Chevron stated the deal boosts its U.S. onshore portfolio with assets in the DJ and Permian basins. The company pointed out the 92,000 acres in the Permian are “largely contiguous and adjacent” to its existing assets. Moreover, it noted the agreement includes an integrated midstream business and established position in the Eagle Ford. Outside the U.S., Chevron will gain a large-scale, producing presence in the Eastern Mediterranean in Israel as well as West Africa assets in Equatorial Guinea.

Later, 11:06 p.m. CDT: After today's announcement that Chevron will buy Noble in an all-stock deal, I'm getting the feeling that we're nearing the point when it will be very, very obvious "we're" culling the herd.

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"Culling the herd."

Wasn't Noble Energy one of the darlings of the shale oil sector? Now gone; bought by CVX. At least that's the plan.

If Noble is culled from the herd, how many more are yet to follow? What amazes me: it seems we still haven't lost many operators in the Bakken.

Forbes weighs in: Chevron's patience pays off with bargain deal for Noble Energy.

Later, 3:00 p.m. CDT: over the next few days, we'll see stories about this deal. Here's one, from Real Money -- "Chevron shows it's pretty slick with Noble Energy deal.

Just like Berkshire Hathaway, this energy giant proves how cash-rich companies will make mincemeat of the little guys in an economic downturn. [I assume the vultures are circling OXY.]

Two weeks ago [the writer] wrote a Real Money column about the absolute fleecing of Dominion by the Oracle himself, Warren Buffett, in Berkshire's purchase of Dominion's natural gas transmission assets.

Now, I feel compelled to write a bonus column about a similarly one-sided transaction in the energy industry. Chevron and Noble Energy announced Monday morning that Chevron would acquire Noble for 58 million shares in an all-stock transaction that values Noble's equity at $5 billion, or about $10.38 per NBL share.

This is absolute steal for Chevron, and as Yogi would say, deja vu all over again.

This is not an asset purchase; Chevron is buying the complete Noble Energy enterprise. So, in addition to assuming the $8 billion in net debt, non-controlling interest that Noble had as of March 31, Chevron gets Noble's holding in Noble Midstream Partners. As of December 31, 2019, Noble Energy owned 62.6% of the limited partner units of Noble Midstream Partners. So, Chevron is buying $500 million worth of valuable transmission assets in the deal, and that lowers the price for "core Noble" to an equity value of $4.5 billion. [I can't buy into analysis: shareholders were likely to get a whole lot less if Noble filed for bankruptcy.]

Original Post

Chevron to buy Noble Energy. From SeekingAlpha:

• in the first significant M&A action since the coronavirus outbreak, Chevron agrees to acquire Noble Energy in an all-stock deal valued at $5B, or $10.38/share, a 7.6% premium over Noble's Friday closing price of $9.65
• including Noble's hefty debt load, the deal would be valued at ~$13B
• buying Noble enhances Chevron's presence in the Permian Basin with 92K largely contiguous and adjacent acres, and in Colorado's DJ Basin, and brings assets in the eastern Mediterranean and West Africa.
• Chevron expects the acquisition to generate $300M in annual run-rate cost synergies before tax and be accretive to free cash flow, earnings and book returns one year after close.
• Noble is Chevron's first major strategic move after walking away from a bidding war for Anadarko Petroleum last year.

Focus on Fracking: weekly edition posted. Lede:

• 4,.34 million bopd of unwanted oil produced in June; drilling of new wells and completions of drilled wells lowest on record 

And a reminder: OPEC to relax production limits. OPEC basket is down slightly today.

Completely unexpected: new LNG port proposed for Houston -- Rigzone. Data points:

• Pilot LNG LLC
• Galveston LNG Bunker Port project
• Pelican Island, between Galveston and Texas City 
• FID: 2Q21
• project:
• a floating liquefaction plant
• would provide LNG marine fuel to vessels to the Texas ports of Houston, Texas City, and Galveston
• would provide LNG to one of the US's largest port complexes
• nameplate liquefaction capacity of 05 million tons per annum
• 18,000 cubic feet of storage capacity

Oil company spins off renewable energy portfolio? Come back to this later, maybe.

Race, in pre-market trading:

• Moderna: drops 7% 
• PFE: up almost 4%
• JNJ: up almost 1% 
• MRK: flat