— This is the script of CNBC's news report for China's CCTV on July 21, 2020, Tuesday.
The deal is being closely watched as the first major acquisition in the energy sector since the outbreak. Chevron's all-share deal for Noble is worth about $5 billion, which, combined with the company's heavy debt burden, puts the total at about $13 billion. The first deal was seen by some analysts as a positive sign for the energy market， however, the details of the deal can still reflect a depressing market environment.
Chevron's bid represents a premium of about 7.6% to Noble's closing price on Friday, slightly less than the equivalent acquisition. Chevron shares closed down about 2% after the deal was announced. Chevron was one of the first big energy companies globally to cut spending after the outbreak. In March it announced $4 billion in cuts to this year's spending budget, that allowed it to cash in on the deal and buy Noble relatively cheaply.
Noble's shares, which topped $75 at their peak six years ago, are now around $10.
Even compared with six months ago, the price is a lot cheaper for Chevron.
The acquisition will not only allow Chevron to expand domestically, but also give it access to assets in the eastern Mediterranean and West Africa, further helping it expand internationally.
In an interview with CNBC, Chevron's CEO said the acquisition was a good deal, even in the current relatively weak oil market environment. They fully considered the potential risk factors and conducted a number of acquisition tests within this price range, and finally ensure that the transaction is completed at a relatively low price.
In terms of oil price, he does see a near-term rebound. Global economic recovery, population growth and a growing middle class are also long-term drivers. In the short term, however, there are still greater uncertainties.
And so I expect choppiness in near term commodity markets, the trajectory of this pandemic continues to be uncertain. The vaccine news this morning is, is encouraging. But I think we have to be prepared for an economy that experiences some ups and downs, long term.
At present, WTI oil prices and Brent oil prices are hovering around US$41 and US$43 per barrel respectively, and there are still about 30% declines this year. It could be a long way before oil prices fully return to pre-epidemic levels. S&P Global Market Intelligence released a report on May 28th, pointing out that they have tracked acquisitions in the oil and gas industry over the past 25 years, mostly in the late 1990s and after the fall in oil prices in the second half of 2014, and expect a similar wave soon.
Now that the first deal has been done, we will also be watching closely to see if there are more mergers and acquisitions to come.