US energy giant Chevron is taking over Noble Energy for $5 bln in an all-share deal, boosting its shale gas assets at home, while expanding its natural gas and crude resources overseas, including Cyprus.
This includes Noble’s stake in Israeli offshore gas fields, as well as Cyprus’ adjacent Aphrodite, where it is a joint venture partner with Shell and Delek.
A joint announcement by the American companies 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.
Noble Energy brings low-capital, cash-generating offshore assets in Israel, strengthening Chevron’s position in the Eastern Mediterranean.”
Former Energy Minister, Georgios Lakkotrypis, at the helm of Cyprus’ energy efforts for seven years, tweeted “a very important development which could have significant implications in the Cyprus exclusive economic zone (EEZ) and the East Med.”
Veteran energy commentator Charles Ellinas said, “Chevron bought Noble Energy mostly because of its shale assets in the US.”
“But more recently it acquired blocks offshore Egypt, in the Red Sea and the Mediterranean, having previously confirmed interest in the region.
It remains to be seen what it does with Aphrodite,” he told the Financial Mirror.
Ellinas, the CEO of e-CNHC (ECP Natural Hydrocarbons Company), argued: “Chevron is doing better than most other majors, but it is very disciplined when it comes to investments.”
“The key to Chevron’s strategy is to maintain dividend growth. So, it is investing in projects with high returns.
In the current oversupplied gas markets and low-price environment, it may take its time before it decides what to do with Aphrodite.
But certainly, it is financially strong and can invest where it fits its plans.”
Bloomberg reported “the takeover is the first major deal since the coronavirus triggered a severe oil slump.
It’s a clear vote of confidence in the future of the U.S. shale industry even as it struggles to adapt to lower crude prices.”
Chevron CEO Michael Wirth said in a statement on Monday: “Our strong balance sheet and financial discipline gives us 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.”
The purchase grows Chevron’s presence in the Permian Basin once the heartland of the U.S. shale boom but now experiencing a sharp reduction in drilling.
It will increase the company’s proved reserves, as reported at the end of 2019, by about 18%, Bloomberg reported.
“This combination is expected to unlock value for shareholders, generating anticipated annual run-rate cost synergies of approximately $300 mln before tax, and it is expected to be accretive to free cash flow, earnings, and book returns one year after close,” Wirth said.
“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,” said David Stover, Noble Energy’s Chairman and CEO.
Noble Energy’s assets will enhance Chevron’s portfolio in the U.S. with the onshore DJ Basin and the Permian Basin, complementing Chevron’s strong position in the Delaware Basin.
In international businesses, Chevron will benefit from the large-scale, producing eastern Mediterranean position that diversifies Chevron’s portfolio and is expected to generate strong returns and cash flow from Israeli output with low capital requirements.
In West Africa, Chevron will also benefit from Noble’s strong position in Equatorial Guinea with further growth opportunities.
Noble Energy made the first discovery offshore Israel in 1999 and delivered the country’s first domestic natural gas in 2004.
Today, the Tamar Platform supplies approximately 70% of the country’s power generation and the Leviathan field delivered first gas in December 2019.
Noble was also the first operator to discover natural gas resources offshore Cyprus in the Levant Basin. In November 2019, the company received the first exploitation license granted by Cyprus, providing a fiscal and regulatory pathway for the economic development of the Aphrodite field.