Chevron’s surprise $5-billion deal to take over Noble Energy is expected to set a price benchmark that will trigger more acquisitions, according to some bankers and analysts. The deal came amid a drought of consolidation in the industry in 2020. Analysts said that dozens of energy companies that have been grappling with the coronavirus pandemic might be more willing to entertain deals now as their way out of debt, with the Noble pricing as a benchmark.
Under the deal, Chevron will spend $5 for every barrel of Noble’s proved reserves. M&A analysts said that such a price might reset expectations for companies which are weighing whether to sell their assets. Chevron also bid Noble’s unproved reserves for the half of $3 a barrel price when bidding Anadarko’s similar reserves last year.
ExxonMobil, Total, and ConocoPhillips are among major producers that have signaled interest in low-cost reserves. Company and land deals by US energy producers stood at only $3.4 billion in the first half of 2020, while turning away from buying assets amid low oil prices. Bankers and analysts expect some consolidations in the industry as it is needed to save some smaller players.
Scott Hanoldm, an analyst with RBC Capital Markets, said in the next three or so years, one of Permian’s big independent drillers would be sold. The drillers in Hanold’s calculation include Parsley Energy, Pioneer Natural Resources, Callon Petroleum, and Diamondback Energy.
