American energy corporation, Chevron, has reportedly announced that it is planning to purchase Noble Energy through a $5 billion all-stock agreement. The move has been taken to bolster the company’s shale presence against falling crude prices and cheaper asset costs. The deal has been reported to be the largest transaction of the year in the U.S. energy sector.

According to Anish Kapadia, the Head of Palissy Advisors, Chevron Corporation is taking advantage of its powerful relative performance against the U.S. exploration and production companies, and has considered capitalization on the downturn by initiating purchases on some high-quality assets.

As part of the deal, Chevron will receive an addition to its free cash flow and earnings per share at $40 Brent, one year after the closing of the transaction. Last May, the company had walked away with a $1 billion fee after Occidental has secured a deal for the acquisition of Anadarko at a sum of $38 billion.

The deal is further expected to give Chevron access to Noble Energy’s flagship Leviathan field which is the largest natural gas field situated in the Eastern Mediterranean and had begun natural gas production late last year.

For the uninitiated, Chevron Corporation was founded in 1879 and has its headquarters in San Ramon, California. It is one of the successor companies of Standard Oil and has its operations in more than 180 countries. Its subsidiaries include Chevron Oronite SA, Texaco, Tengizchevroil, and others.

The planned transaction would value Noble Energy at around $13 billion, inclusive of debts. The deal will also facilitate the expansion of Chevron’s presence in the Permian Basin across New Mexico and West Texas, and the DJ Basin of Colorado. While Noble’s stakeholders will continue to hold about 3 per cent of combined company post-acquisition, the deal would add a potential benefit of around $300 million as annual cost savings.

Source Credits:

https://www.cnbc.com/2020/07/20/chevron-to-buy-noble-energy-in-a-5-billion-deal.html