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Chevron has pulled out its pocketbook and will acquire Noble Energy for $5B. Including debt, the total value of the deal is $13B.
This all stock deal is the largest in the energy sector since the pandemic washed ashore the US in March, edging out Berkshire’s $4B acquisition of Domino’s Piz… I mean, Dominion Energy two weeks ago.
But with the oil industry suffering from weak demand and uncertainty amid these “unprecedented times” *barfs*, it sure looks like a bold strategy, Cotton.
So why did Chevron pull the trigger?
According to Chevron’s CEO Mike Wirth, the deal should produce gradual growth for earnings, free cash flow, and returns. Diving deeper into his merger dictionary, he also indicated that the new company will have resilience to the downside, continued leverage to the upside, and result in $300M of annual cost savings. Read: #synergies.
Noble Energy’s presence in the Permian Basin and Colorado’s DJ Basin were also solid selling points. Mmm, I love the smell of Texas Light Sweet in the morning. Additionally, Noble has assets in Israel and West Africa, and has projects in the Mediterranean that supply natural gas to Israel, Egypt, and Jordan.
The bottom line…
Chevron really shook off the cobwebs with this one, making the biggest purchase of 2020 in the energy space.
But of course they had to come out big and one up Buffett, after suffering embarrassment last year at the hands of the wild catting octogenarian.Anadarko, with the help of the Oracle of Omaha, acquired Occidental Petroleum for $38B right out from under Chevron. Chevron was left holding the bag, withdrawing its bid and getting hit with a $1B termination fee.
Cmon, you think it’s any coincidence that the deal yesterday is $1B above Buffets from earlier this month?
Water Cooler Talking Point(s)
💧 “Try and tell me you wouldn’t go to a club if you heard DJ Basin was spinning on the ones and twos…” – (Nick, The Water Coolest HQ)
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