The Anadarko episode helped shape the decision to do a play for Noble Energy now, Wirth told CNN Business in an interview.
“[It] it reinforced our existing commitment to discipline, focusing on value creation and risk understanding, “said Chevron’s CEO.” We are not going to pursue courage. “
But don’t call it a bidding war.
“We never got into a war. The other (Western) side really bid against itself multiple times,” Wirth said. “The war was not with us. It was within.”
Chevron announced Monday that it will buy Noble Energy for $ 13 billion, including the assumption of $ 8 billion of debt, in a stock deal. And the timing of the purchase couldn’t be more different from the Anadarko deal.
Buyer’s market, but is Noble Energy right?
Last spring, oil prices were stable and the industry appeared to be stable. Now independent oil and gas producers are under enormous stress. Energy prices are depressed, production is shrinking and the debt burden is increasing bankruptcy fears.
Noble’s share price plummeted to just $ 3.02 in March, marking a staggering 88% decline for the year. The stock continues to drop 57% on the year.
Chevron agreed to pay just $ 10.38 a share for Noble, representing a slim premium of just 8%.
It is clearly a buyer’s market, and Chevron certainly has the resources to make strategic acquisitions.
“In our industry, the story is that there has been some consolidation during recessions. A safe harbor can be found by bringing together two companies that are stronger,” said Wirth.
But the Anadarko fiasco is a reminder that buyers need to be careful about the companies they hook up with.
“We are confident that this is a good company,” Wirth told CNN Business. “They are, in some way, victims of their own success,” he said of Noble Energy, adding that the company’s natural gas fields in the Eastern Mediterranean have become so massive that they now represent a substantial part of the entire company.
“For a company of its size, that begins to raise questions for investors about the concentration of risk,” said Wirth.
By contrast, Noble Energy will represent only a small part of Chevron, representing just 7% of the big company’s business value, according to financial services firm Raymond James.
Job cuts looming
Chevron recognizes The deal will kill jobs. Both companies have already been cutting jobs, and Chevron estimates the acquisition will generate operating and other cost savings of approximately $ 300 million.
Although it is too early to say how many jobs could be affected, Wirth noted that there is an “overlap” between Chevron and Noble’s field operations. He suggested that most of the cost reduction will come from the home office functions.
Externally, the Noble Energy deal has received a mixed reception.
Rystad Energy analyst Artem Abramov applauded the fact that the acquisition will diversify Chevron by adding natural gas assets in Israel and Cyprus. Chevron is also expanding its oil portfolio in the US by taking over Noble’s “low-cost cash cow assets” at DJ Basin, a shale field in Colorado and Wyoming.
“We view the deal as highly likely value creation for Chevron,” Abramov wrote in a report.
Others think Chevron could have better used its financial resources internally.
“Objectively speaking, Chevron does not need to make this deal,” Raymond analyst James Pavel Molchanov wrote in a note to clients.
Molchanov described the deal as “unnecessary” and noted that “Noble has been a highly leveraged company.”
In fact, the majority of the Noble Energy acquisition is debt, comprising $ 8 billion of the total $ 13 billion.
CEO: our dividend is safe
However, Chevron played down those debt concerns.
“We are a great company … This does not compromise the strength of our balance sheet,” Wirth told CNN Business.
“We remain committed to our dividend, which is vitally important to our shareholders,” said Wirth. “Not everyone in our industry has been able to say that.”
Analysts have speculated that the Noble deal could trigger a wave of deals in the energy industry.
But Wirth is in no rush to make more takeover bids.
When asked if Chevron would make its balance sheet more flexible by making more acquisitions, Wirth said his focus is on restructuring the company and integrating Noble Energy, two complex tasks that involve many people.
“We need to do both well,” said Wirth. “In the short term, those are the priorities.”
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