Energy giant Chevron (CVX) - Get Chevron Corporation Report on Monday said it will buy Noble Energy (NBL) - Get Noble Energy, Inc. (NBL) Report for $5 billion in stock in what marks the biggest oil-patch tie-up since the coronavirus pandemic took hold.
Chevron announced on Monday that it will buy Noble at for $10.38 a share, or 0.1191 a Chevron share. At that level, the deal represents a roughly 7.6% premium over Noble’s Friday closing price of $9.65 and nearly 12% based on a 10-day average.
Including Noble debt, the total enterprise value of the deal is $13 billion.
Shares of Noble were up 6.549% at $10.18 in trading on Monday.
Buying Houston-based Noble, which has both U.S. and international operations, compliments Chevron’s presence in the oil-rich deposits of the DJ Basin of Colorado and Permian Basin, which spans West Texas and New Mexico.
It also gives Chevron, which has a market value of $163 billion, assets in the eastern Mediterranean and West Africa. Chevron's stock was down 2.05% at $85.43.
“Our strong balance sheet and financial discipline gives us the flexibility to be a buyer of quality assets during these challenging times,” Chevron CEO Michael Wirth said in a statement. “This is a cost-effective opportunity for to acquire additional proved reserves and resources."
San Ramon, Calif.-based Chevron’s stock has surged more than 70% from its March 23 low, despite an unprecedented drop in oil prices sparked in part by the coronavirus pandemic and shutdown of economic activity globally, though augmented by a price war between Russia and Saudi Arabia that fueled one of the biggest supply guts in history, pushing futures contracts for West Texas Intermediate - the U.S. bellwether - briefly entered negative territory in April.
West Texas Intermediate last traded at $40.20 on Monday in New York.
Meanwhile, more than 20 North American oil producers have filed for bankruptcy this year, the Journal said, citing law firm Haynes & Boone LLP, with California Resources (CRC) - Get California Resources Corp Report the latest to file for protection from creditors on Friday.
The Santa Clara, Calif., company, which filed a prearranged restructuring in U.S. Bankruptcy Court for the Southern District of Texas, said it had reached an agreement for a $1.1 billion debtor-in-possession financing package.
Other energy producers including Denbury Resources (DNR) - Get Report and Noble Corp. (NE) - Get Report have missed their July debt payments, while Chaparral Energy (CHAP) - Get Report has asked its lenders for more time, setting the company on course for a possible default.
Last month, the International Energy Agency said global oil demand was unlikely to return to pre-pandemic levels for at least another two years, following the biggest downturn in oil-market history.