DBRS Morningstar Comments on Chevron’s Agreement to Acquire Noble Energy

DBRS Limited (DBRS Morningstar) notes that Chevron Corporation (Chevron or the Company; rated AA with a Negative trend) has announced a definitive agreement to acquire all outstanding shares of Noble Energy for $5 billion, or $10.38 per share, in an all-stock transaction. The acquisition, which is subject to the approval of regulators and the shareholders of Noble Energy, plus other customary closing conditions, is expected to close in Q4 2020. Noble Energy shareholders will receive 0.1191 shares of Chevron for each share in Noble Energy. The total enterprise value of the deal is approximately $13 billion, including net debt and book value of non-controlling interest.

The acquisition will provide Chevron access to additional unconventional acreage in the DJ Basin and the Permian Basin, in addition to Noble Energy’s international assets in the Eastern Mediterranean and West Africa. Noble Energy reported average sales volume of 390,000 barrels of oil equivalent per day for Q1 2020. Chevron also expects to achieve pretax operating cost synergies of $300 million as a result of the acquisition.

Given Chevron’s already large size, strong liquidity profile, and the all-stock nature of the transaction, DBRS Morningstar believes the deal has a modestly positive impact on the Company’s business risk profile, a nominally negative impact on the Company’s credit risk profile, and no impact on the overall Issuer Rating.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodologies are Rating Companies in the Oil and Gas and Oilfield Services Industries (August 23, 2019) and DBRS Morningstar Criteria: Rating Corporate Holding Companies and Parent/Subsidiary Rating Relationships (November 25, 2019), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

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