Noble Energy Inc. shareholders on Oct. 2 are expected to approve its sale to Chevron Corp. for about $4.2 billion in stock, cementing the first big energy deal since the coronavirus crushed global fuel demand.
The purchase would boost Chevron's U.S. shale oil holdings and add nearly 1 Bcf of natural gas reserves close to growing markets. Noble's Leviathan, one of the world’s biggest offshore gas discoveries of the last decade, began pumping gas from the field late last year.
Proxy advisers Institutional Shareholder Services (ISS) and Glass Lewis have recommended approval of the deal. Activist investor Elliott Management Corp., which took an undisclosed stake in Noble, has not said how it would vote.
Noble declined to make an executive available for an interview. Chevron and Elliott Management declined to comment.
The all-stock deal values Noble at about $4.2 billion, or $8.58 per share, based on Chevron's price on Thursday, excluding about $8 billion in debt. Weak oil prices and a lack of rivals has the stock down about 11% from the day before the deal was announced and off 64% this year.
Chevron is "doing it at a good time. They're not stretching the balance sheet, they haven't bet the company on it," said David Katz, president of Matrix Asset Advisors, which holds Chevron shares.
The deal comes during a "brutal downcycle" in oil and gas, said Tom Ellacott, a researcher at consultants Wood Mackenzie. Chevron is now in "a strong position and not facing as much competition."
Noble had contacted eight companies when looking for a partner and held talks with six potential buyers. However, no rivals have emerged since the deal with Chevron was struck.
The alternatives to Chevron were either "high-risk" or "did not result in any material benefit," Noble said in an August regulatory filing.
Chevron last year walked away from a deal for Anadarko Petroleum and took a $1 billion break fee, a decision that looked even better as oil prices cratered.
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