This week Chevron became the first foreign energy company to enter the Israeli market, a watershed moment for a country long kept at bay by corporations fearful of losing business in the Gulf Arab states.
The US multinational, owned by Rockefeller announced it had bought out Texas-based Noble Energy in a US$5 billion deal with an overall value of $13 billion, including debt.
Noble discovered all of Israel’s major gas holdings in the last 20 years, most notably the Tamar and Leviathan fields in the eastern Mediterranean.
Israeli companies own 60% of the Leviathan field and 75% of the Tamar field, while Chevron will now own the remainder. Noble is also selling its assets in Africa and the USA, but the Israeli fields are the centerpiece of its portfolio.
Chevron’s acquisition of Noble Energy comes early in the crude price and credit-tightening cycles, which makes its returns on capital reliant on a recovery in U.S. oil prices and, consequently, slower growth from peers.
Analyst at RBC Capital Markets were unimpressed. “Our conversations with investors indicate that most see the acquisition premium as a bit low and are left wondering why the board of directors sold at that valuation.
Chevron has shown interest in buying up distressed shale producers before. Wirth said it was the unique combination of Noble’s nearby, high-quality Permian assets, the huge Israeli gas operation as well as the DJ Basin that got the deal done.
Last year, Chevron lost the takeover battle for Anadarko but ultimately walked away the victor with a $1 billion break-up fee as oil prices plunged.
Occidental won with a higher bid, but has subsequently struggled with the large debt pile resulting from that deal. Its shares are down about 75% since the Anadarko saga began.
Asia Times / ABC Flash Point Oil News 2020.