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Noble Energy Agrees to $5 Billion Buyout Offer from Chevron

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Shares of Noble Energy traded higher after Chevron Corp. entered into a definitive agreement to acquire the company in an all-stock transaction valued at $5 billion, or $10.38 per share.

Independent oil company Noble Energy Inc. (NBL:NASDAQ) announced today that it has entered into a definitive agreement with global integrated oil giant Chevron Corp. (CVX:NYSE) whereby Chevron has agreed to acquire 100% of Noble Energy's outstanding shares in an all-stock transaction valued at $5 billion, or $10.38 per share.

The company advised that "based on Chevron's closing price on July 17, 2020 and under the terms of the agreement, Noble Energy shareholders will receive 0.1191 shares of Chevron for each Noble Energy share and the total enterprise value, including debt, of the transaction is $13 billion."

Chevron believes that by acquiring Noble Energy it will add low-cost, proved reserves and attractive undeveloped resources to further enhance its upstream portfolio. The company pointed out that Noble Energy specifically brings low-capital, cash-generating offshore assets in Israel which will strengthen Chevron's Eastern Mediterranean presence. The firm mentioned that the Noble Energy purchase will also increase Chevron's position in the U.S. with additional de-risked acreage in the DJ and Permian Basins.

Chevron's Chairman and CEO Michael Wirth commented, "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. 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. We look forward to welcoming the Noble Energy team and shareholders to bring together the best of our organizations."

Wirth added, "This combination is expected to unlock value for shareholders, generating anticipated annual run-rate cost synergies of approximately $300 million before tax, and it is expected to be accretive to free cash flow, earnings, and book returns one year after close."

Noble Energy's Chairman and CEO David Stover remarked, "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...Over the last few years, we have made significant progress executing our strategic objectives, including driving capital efficiency gains onshore, advancing our offshore conventional gas developments and significantly reducing our cost structure. As we looked to build on this positive momentum, the Noble Energy Board of Directors and management team conducted a thorough process and concluded that this transaction is the best way to maximize value for all Noble Energy shareholders. We look forward to bringing together our highly complementary cultures and teams to realize the long-term value and benefits that this combination will deliver."

The acquisition is structured as an all stock transaction and upon completion of the transaction, Chevron noted that it plans to issue approximately 58 million shares of stock. According to the report, the transaction price represents a premium of nearly 12% on a 10-day basis based on the closing stock price on July 17, 2020, and that after the purchase is finalized, Noble Energy shareholders will own approximately 3% of the combined company.

The companies indicated that the transaction is expected to close in Q4/20 and that the deal has already been unanimously approved by both firm's Boards of Directors. The report noted that the acquisition remains subject to approval by Noble Energy shareholders as well as various regulatory approvals and customary closing conditions.

Chevron Corporation is headquartered in San Ramon, Calif., and is one of the world's largest integrated energy companies. The firm operates globally in just about every aspect of energy business including oil and gas exploration, production, transportation, refining and fuel distribution. The company also manufactures lubricants, additives and petrochemicals, and is engaged in power generation.

Noble Energy is an independent oil and natural gas exploration and production company based in Houston, Tex. The company operates both onshore in the U.S. and offshore off the west coast of Africa and in the Eastern Mediterranean.

Noble Energy began the day with a market capitalization of around $4.6 billion with approximately 479.7 million shares outstanding and a short interest of about 3.0%. NBL shares opened more than 10% higher today at $10.66 (+$1.005, +10.41%) over yesterday's $9.655 closing price. The stock has traded today between $10.09 and $10.66 per share and is currently trading at $10.24 (+$0.59, +6.11%).


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