Chevron To Buy Noble -- July 20, 2020

Chevron to buy Noble. Is OXY next?

• NBL: market cap: $4.63 billion; trading $10/share; jumps 10% in pre-market trading
• OXY: market cap: $15 billion; trading at $16/share; shares up slightly pre-market trading; $42 billion in debt;

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OPEC basket: down; trading at $43.22. Not good news for Saudi.

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Back to the Bakken

Active rigs:

$40.24	7/20/2020	07/20/2019	07/20/2018	07/20/2017	07/20/2016
Active Rigs	11	55	68	59	31

Three wells coming off the confidential list -- 

Monday, July 20, 2020: 50 for the month; 50 for the quarter, 496 for the year:

• 35912, F/NC, CLR, Jamestown Federal 14-17HSL1, Banks, t--; cum 109K 3 months, 7 days; a 40K month;
• 35695, SI/A, Oasis, Joplin 5397 42-32 7B, Banks, t--; cum 104K in three months; a 41K month;

Sunday, July 19, 2020: 48 for the month; 48 for the quarter, 494 for the year:

• 37267, loc/NC, CLR, Rodney 4-20HSL1, Big Gulch,

Saturday, July 18, 2020: 47 for the month; 47 for the quarter, 493 for the year:

• None.

RBN Energy: OXY's prospects hinge on oil price, cash flow as debt repayment looms.

With Broadway theaters shuttered and Hollywood studios on lockdown, one of the most compelling long-term American dramas is the ongoing saga of U.S. E&P Occidental Petroleum (Oxy). Act One was a compelling David-vs.-Goliath story as Oxy battled oil major Chevron in early 2019 to acquire Anadarko Petroleum and its prime Permian acreage. Among the most fascinating elements was the supporting cast, which featured business legend Warren Buffett, who contributed a critical $10 billion to push Oxy’s deal over the top, versus billionaire investor and corporate raider Carl Icahn, who led an unsuccessful struggle to stop what he called “the worst deal I’ve ever seen.” Oxy snagged Anadarko with a winning bid of $57 billion, the fourth-highest total for an oil and gas transaction and a 20% premium to Chevron’s offer, and predicted strong future production, dividend, and cash flow growth. But those optimistic projections have been upended in the ongoing Act Two, as plunging oil demand and prices from the COVID-19 pandemic have stymied planned asset sales and ravaged cash flows. Oxy has responded by reining in spending, revamping operations, refocusing divestment plans, and restructuring debt. But is it enough? Today, we analyze the company’s current strategies and financial maneuvering, as well as the near-term outlook, under a range of oil price scenarios.

Although almost all U.S. E&Ps have been rocked by the oil market crisis to some degree, Oxy faces an especially difficult challenge because of the massive debt it assumed in its purchase of Anadarko, which includes $11.1 billion due in 2021-22. Before we get to the implications of that debt and Oxy’s plans for navigating it, let’s quickly review the details of Oxy’s blockbuster acquisition of Anadarko.

On April 12, 2019, Chevron announced it had reached an agreement to acquire Anadarko for $65/share or, more precisely, $16.25/share in cash and $38.75/share in stock, plus the assumption of debt. Oxy, which said it had made several private offers to acquire Anadarko in 2018 and 2019, countered on April 24, 2019, with a bid of $76/share, including $38/share in cash, more than twice the cash Chevron was offering and a total 20% premium above Chevron’s bid. On April 30, Oxy boosted the credibility of its offer by announcing that Warren Buffett had agreed to contribute $10 billion of the $19 billion cash offer in exchange for Oxy preferred shares paying an 8% annual dividend. On May 9, Chevron declined to exercise its option to submit a revised bid, and the Anadarko board accepted Oxy’s offer, despite having to pay a $1 billion, or $2/share, deal-termination fee to Chevron.