Chevron agrees to buy Noble Energy for $5 billion in shares.

Chevron Noble Energy

Chevron Corp. agreed to buy Noble Energy Inc. for about $5 billion in shares.

The takeover is the first major deal since the coronavirus triggered a severe oil slump. It’s a clear vote of confidence in the future of the U.S. shale industry even as it struggles to adapt to lower crude prices.

“Our strong balance sheet and financial discipline gives us the flexibility to be a buyer of quality assets during these challenging times,” Chevron Chief Executive Officer Michael Wirth said in a statement on Monday. “This is a cost-effective opportunity for Chevron to acquire additional proved reserves and resources.“

The deal values Noble at $10.38 a share, or 0.1191 of a Chevron share, equivalent to a 7.5% premium over Friday’s closing price. The total enterprise value, including debt, is $13 billion. Dow Jones was first to report the transaction.

The purchase grows Chevron’s presence in the Permian Basin, once the heartland of the U.S. shale boom but now experiencing a sharp reduction in drilling. It will increase the company’s proved reserves, as reported at the end of 2019, by about 18%.

The transaction has been approved by the boards of both companies and is expected to close in the fourth quarter, subject to regulatory approvals.

Last year, Chevron lost a takeover battle for Anadarko Petroleum Corp. Occidental Petroleum Corp. won with a higher bid, but has subsequently struggled with the large debt pile resulting from the deal.

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