Chevron Takeover of Noble Energy

CHEVRON TAKEOVER OF
NOBLE ENERGY

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
ESSAY ............................................................................................................................................1
Background..................................................................................................................................1
Current State of Oil and Gas Industry..........................................................................................2
Present Analysis of rationale of Chevron acquiring Noble energy .............................................3
Analysis of deal structure with the reference to market and theoretical valuations. ..................6
CONCLUSION ...............................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Acquisition of the Noble Energy by Chevron has provided low cost, attractive
underdeveloped resources and proved resources will enhance already advantaged upstream
portfolio. The Noble Energy bring the low capital, cash generating off shores asset in the Israel is
strengthening the position of Chevron in Eastern Mediterranean. Noble Energy has also
enhanced the US unconventional position having de-risked acreage in DJ Basin and the 92000
largely contiguous and the adjacent acres in Permian Basin. As per current trend oil and gas
industry has shrunk rapidly and it has fallen down to 2.6% in 2019 which was 16% in 2008. The
demand has fell significantly due to decarbonising world focusing over the electric and bio
resources. The international economic growth has also decreased the demand. Essay will discuss
about the current financial environment and issues relating to the acquisition of Noble Energy by
Chevron.
ESSAY
Background
Chevron is American multinational energy company. It is successor of company of the
Standard Oil headquartered in the San Ramon, California and is currently active in around 180
countries. Company is also engaged in each aspects of natural gas, oil, hydrocarbon exploration
and the refining, production, transport, marketing, chemical sales and manufacturing and also the
power generation. Company is ranked 15th in Fortune 500 with yearly revenue of the $146.5
billion and has market valuation of around $136 billion. In 2020 it was ranked 61st for largest
public company in world. In the year 1911, federal broke the Standard Oil in several pieces
under Sherman Antitrust Act. Among them one piece became Chevron and part of Seven Sisters
that dominated oil industry of world in 20th century (Eran, 2019). The company owns Standard
Oil trademark in sixteen states of south eastern and western United States. On 10th October, 2000
Texaco announced purchase share of General Motors in the GM Ovonics that manufactures
NiMH batteries for the electric cars. On 15th October 2000, Chevron made announcement for
acquisition of the Texaco in deal of $45 billion which made it second biggest oil company of US
and 4th largest publicly trading oil company having market value of around $95 billion. As in 31st
December 2018 company had 48600 employees in which 51% were employed in the US
operations. The primary gas production and exploration operations are in US, Nigeria, Angola,
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Gulf of Mexico and Kazakhstan. In 2018 upstream business of company reported net production
worldwide of 2.930 million barrels a day.
Noble Energy is company engaged in the hydrocarbon exploration that is headquartered
in the Houston Texas. It was previously recognised as the Noble Affiliates, Inc till 2002. In 2018
it had oil barrels equivalent to 1929 million. Company had total proved reserves of natural gas
62%, liquid natural gas 14% and petroleum 24% (Hemel and Nielson, 2017). The primary
holdings of company were in Denver Basin / Wattenberg Gas Field. Company owned 74000 of
developed acres and around 111000 of underdeveloped acres in 10 & 90 miles of offshore under
water depths in Israel that range from 700 ft to 6500 ft. In 2020 October, Chevron corporation
acquired the Noble Energy .
Current State of Oil and Gas Industry
Gas and Oil industry is familiar with high and low of the economic cycle. As per recent
study of World Bank for projections of major commodity prices is been result of the several
factors like production cut of crude oil that OPEC and the Non OPEC countries implement from
the 2016, for fostering upward trend in the prices of crude oil, constant increase of US oil & gas
productions. It mitigates the increase and force price down. In 2017 OPEC countries decided for
reducing the productions by 1.8 million barrels daily for supporting prices and recovering
investments. The oil industry has shrunk significantly in the recent years as energy stocks were
made of 16% in S&P 500 companies which is only now 2.6%. USA is continuously increasing
the supply of hydrocarbons with the boom of production and extractions of the unconventional
hydrocarbons. Average price of the crude oil increased from $46 to $76 in 2017- 2018 while in
November it dropped again to $62 per barrel (McGiven, 2017). It is forecasted that it could fall
to 41.43 in coming years because of ongoing oil crisis.
Decrease in demand by Decarbonising world
Due to shift in the global energy mix from the fossil fuels to the renewable. The energy
transformation and green deal is gaining momentum and leading to formation of new ecosystems
and also emergence of new technologies. The development help in growth of renewable,
development of energy carriers, improving energy efficiency, reducing emissions and also
creating the new carbon markets. But this is significantly impacting the demand of oil. It has
imposed great challenge for the oil industry to survive in the world going green and electric.
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