American supermajor Chevron Corporation has agreed to acquire all of the outstanding shares of Noble Energy for a total of $5 billion, or $10.38 per share, according to a press release.
The strategic acquisition bolsters Chevron’s upstream portfolio with low-cost, proven reserves, and attractive undeveloped resources. Noble Energy formerly held assets offshore Isreal, meaning that Chevron’s position in the Eastern Mediterranean will be improved. Furthermore, the acquisition of Noble Energy will enhance Chevron’s strategic US assets with de-risked acreage in the DJ Basin and 92,000 largely contiguous and adjacent acres in the Permian Basin.
“Our strong balance sheet and financial discipline gives us the flexibility to be a buyer of quality assets during these challenging times,” said Chevron’s CEO Michael Wirth. “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.”
This transaction is expected to achieve run-rate operating and other cost synergies of $300 million. Coupled with this, Chevron expects there to be an accretive return on capital employed, free cash flow, and earnings per share one year after closing, at $40 Brent.
The transaction has been approved by both Boards of Directors and is expected to be completed by Q4 2020.