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Chevron’s portfolio will be expanded with Noble’s cash cow assets

Oil&Gas Materials 21 July 2020 13:13 (UTC +04:00)
Chevron’s portfolio will be expanded with Noble’s cash cow assets

BAKU, Azerbaijan, July 21

By Leman Zeynalova – Trend:

The transaction to buy Noble Energy will establish the US Chevron as a key player in the Eastern Mediterranean region, with key assets in Israel and Cyprus that could be fast-tracked for development, Trend reports citing Rystad Energy.

Noble’s assets in Israel are set to generate stable cash flow in the years to come, the company said.

“Yet the most significant upside in terms of economically recoverable resources (assuming our base case scenario with long-term Brent oil prices of $60) comes from the US. Chevron’s portfolio will be expanded with Noble’s low-cost, cash cow assets in the DJ Basin and, more notably, via complimentary acreage positions in Southern Reeves County along with some overlap in Andrews County in the Permian Basin,” the company believes.

Rystad Energy points out that the debt that Chevron picks up through this acquisition has no upcoming maturities and NBL stock is essentially converted at a discounted price based on fundamental asset valuation.

“Ultimately, this is a cash-free deal with no short-term capital involvement; if the market recovers further, Chevron might not only get the double of NBL’s equity value but also exhibit a very low level of due bonds, which will likely be covered by the market recovery on the equity side anyway,” reads the report released by Rystad Energy.

On a net production basis, Chevron now becomes the second largest tight oil producer, trailing only EOG based on estimated net tight oil production for 2020, said the company.

“Chevron is the largest non-operating producer in the Permian and also has a higher contribution from liquids-rich gassier zones compared to most of its large peers. However, when it comes to gross operated oil production in recent years, Chevron’s Permian output has been slightly behind the group of top producers in the basin, where Occidental leads the pack ahead of second tier players Pioneer, EOG, Concho and Diamondback. Now, thanks to Noble’s operated production of about 60,000 bpd, Chevron will enjoy full operated oil production potential of around 260,000 bpd, net of curtailments implemented in 2Q20,” Rystad Energy believes.

In addition to gaining Noble’s Permian portfolio, Chevron now also gets access to its low cost DJ Basin assets, which can be viewed as an important source of free cash flow in the coming years, according to the company.

“The transaction makes Chevron the second largest producer in the DJ Basin, which was Noble’s key focus region, with very competitive breakeven prices. It should be noted that these DJ assets showed fairly shallow base decline and, even without new drilling and completion work, base production can still be expected to generate somewhere between $1.5 billion and $3.5 billion in free cash flow assuming WTI oil prices remain in the range of $40 to $60 per barrel.”

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