“Since the crash of oil price and demand in March 2020, there has been an increasing expectation for mergers and acquisition (M&A) activity to show existing opportunities despite the depressed economic cycle. Chevron’s US$13bn acquisition of Noble Energy, including debt, is indeed the largest in 2020 and has an international diversification component, in both resource type and geography, which confirms that, besides healthy balance sheets, the most resilient companies during the pandemic have shown flexibility thanks to diversified portfolios. It signals the optimal future strategy for major oil and gas companies.
“For this particular transaction, it is really the Eastern Mediterranean assets that are the interesting bet in Chevron’s longer term plans. These fields are expected to benefit from increasing natural gas demand in the region and ultimately LNG demand worldwide. Obviously, at the moment, consumption of natural gas has been depressed due to the current economic crisis, but there is low uncertainty on the future role of natural gas as a primary source of energy and its increasing demand. From this perspective, these fields are a good portfolio addition.
“Furthermore, for a company such as Chevron, it is in its nature to manage giant projects such as the Leviathan gas field in Israel. Phase 1A of the field alone can reach 1.2 bcfd of peak capacity and for subsequent phases a FLNG facility has been considered for optimizing export volumes. A company such as Chevron can definitely accelerate these type of multi-phase developments if needed.
“With respect to Noble Energy’s US unconventional positions in the Permian and DJ Basin plays - these are also convenient acquisitions. It is in the DJ Basin where Chevron will be a new player, and can combine its operational and investment capabilities with Noble’s expertise in the area to drive a larger scale development. The Permian acquisition is 92,000 acres and around 40% of what Chevron wanted to acquire with the failed Anadarko bidding of 2019 - but still respectable since it allows for more synergies and potentially larger scale developments in the Permian, where the company can prioritize capital investment.”
