Noble shareholders will receive Chevron shares in this share transaction. Chevron’s shares held steady in pre-trade.
The US oil and gas shale industry has been hit hard during the pandemic. Demand has dropped when people stopped traveling and traveling. And energy prices fell as a global oil stagnation in a timely manner temporarily increased supply as people used less oil.
To make matters worse, many power producers had incurred piles of debt to finance their operations before the current recession.
US oil shale operators have come under fire for low energy prices. Last month, a Deloitte study said that about 30% of shale players would be technically insolvent at oil prices of $ 35 a barrel. On Monday morning, US oil futures hovered around $ 40 a barrel, after having recovered from falling below zero in April.
But for companies looking to buy cheap assets, these are good conditions for shopping.
The Noble-Chevron bond fits perfectly. Adding Noble’s not-so-noble $ 8 billion debt stack raises the value of the transaction to $ 13 billion.
Although Noble has serious debt, his assets, including his proven but undeveloped reserves, are an attractive and relatively cheap purchase for Chevron (CVX).
Once the companies combine, their merger will generate about $ 300 million in annual cost synergies. The acquisition is expected to close in the last quarter of the year.
– Matt Egan contributed to the story.
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