Cyril Widdershoven
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Chevron Gas Station Canopy and Sign

In a statement made by Chevron it stated that it has entered into a definitive agreement with Noble Energy, to acquire all of the outstanding shares of Noble Energy in an all-stock transaction valued at $5 billion.

The total value of the deal is slated to be US$13 billion. The main underlying reason for the acquisition by Chevron is that it will provide it with additional low-cost, proved reserves and attractive undeveloped resources that will enhance an already advantaged upstream portfolio. Chevron reiterates that the Noble Energy acquisition will be bring low-capital, cash-generating offshore assets in Israel. Chevron also looks at Noble Energy to expand is in the leading U.S. unconventional position with de-risked acreage in the DJ Basin and 92,000 largely contiguous and adjacent acres in the Permian Basin.

Chevron CEO Michael Wirth stated that the Noble Energy acquisition is “a cost-effective opportunity for the company 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. Chevron also reiterated that “the new 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 assets:

U.S. onshore

DJ Basin – New unconventional position with competitive returns that can be further developed leveraging Chevron’s proven factory-model approach.

Permian Basin – Complementary acreage that enhances Chevron’s strong position in the Delaware Basin.

Other ­– An integrated midstream business and an established position in the Eagle Ford.



Israel – Large-scale, producing Eastern Mediterranean position that diversifies Chevron’s portfolio and is expected to generate strong returns and cash flow with low capital requirements.

West Africa – Strong position in Equatorial Guinea with further growth opportunities.

The Optimism shown however should be assessed still looking at the ongoing East Med and global oil and gas markets developments. Last week Noble reported that COVID has hit its operations and revenues hard. Due to a 10% volume drop and weakness in oil prices, with WTI averaging less than $28 per barrel in Q2-2020, Noble Energy’s earnings will be lower. Some of the US onshore production is being restored, concentrating low-cost DJ Basins wells online while gas production from offshore Israel will also climb.

Still, Noble Energy reiterated that due to COVID and energy markets slump earnings will fall significantly. But its outlook is now looking better. Taking into account that its US onshore production dropped by almost 8% to 248,000 b of oil equivalent per day (-3.4% oil and natural gas Israel -21%). Noble Energy still is optimistic about oil price H2 2020, as it should be significant higher.

For Israeli gas sales volume from the Tamar and Leviathan fields it expects a substantial increase. However, looking at the current Israeli COVID issues and East Med economic recovery, statements made about higher volumes should be questioned. Sales from Tamar and Leviathan to Egypt’s Dolphinus Holdings are expected to be large from this month onwards, based a long-term agreement to supply a total of 3 trillion cubic feet of gas to Dolphinus for 15 years, with supplies starting from January 2020, ramping up in July 2020, and increasing further in July 2022.

This could again be very optimistic when assessing the Israeli economic situation, Egypt’s struggling economy and a lack of interest for Egyptian LNG on the global markets at present. Some major setback should be expected. Other new projects, such as its Alen Gas Monetization project, which is slated to start up in early-2021, in Equatorial Guinea, could also be facing headwinds.

Chevron is taking significant risk at present. The combination of onshore US shale and East Med offshore gas, before COVID-19, would have been very promising and commercially attractive. At present, especially at the global gas market, and East Med especially, too many risks are out there to become very comfortable. Not only COVID-19 and economic risks are still there, or even re-emerging, East Med’s geopolitical situation is far from positive. Demand is low, while outright potential geopolitical risks (Turkey, Greece, Cyprus, Egypt-Libya) don’t bode well for optimistic investment strategies.

Chevron’s take-over agreement for Noble Energy is the second East Med linked M&A deal the last week. Today, London-Tel Aviv listed international oil company Energean announced that at its General Meeting (GM) has passed the resolution for the assets of Italian independent Edison. Energean, already holding assets offshore Adriatic, Greece and Israel, announced July 4 the conditional acquisition of Edison E&P for $750 million plus $100 million of contingent consideration. The acquisition of Edison E&P, exclusive of the Algerian assets and Norwegian subsidiary, which was the subject of the above resolution, is expected to be completed later in 2020.


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