Analysts: Chevron could buoy O&G activity in Weld after acquiring Noble

WELD COUNTY — An energy analyst and Chevron Corp. (NYSE: CVX) CEO Michael Wirth both believe that the company’s announced acquisition of Noble Energy Inc. (Nasdaq: NBL) could position the local industry for a rebound in activity next year.

Chevron announced its intention to buy Noble on Monday in an all-stock deal valued at $5 billion, the first major acquisition in the industry since the dual whammies of a global price war between Saudi Arabia and Russia and the widespread drop in travel due to the coronavirus pandemic torpedoed oil prices.

Noble is the state’s second-largest oil producer with 30.91 million barrels of oil and 215.18 million metric cubic feet of natural gas extracted out of Weld County last year, according to Colorado Oil and Gas Conservation Commission data.

That drop in price has forced producers to cut rig activity, lay off staff and, in the case of Extraction Oil & Gas Inc. (Nasdaq: XOG) and Whiting Petroleum Corp. (NYSE: WLL), file for Chapter 11 bankruptcy.

Oil production as a whole dropped 56% in Weld County from March to April, while about 6,000 wells were stopped in the period as the commodity no longer commanded break-even or profitable prices.

Bernadette Johnson, a vice president of analytics at Enverus, said she expects rig count and activity from operators to start rebounding once oil hits $50 per barrel, but Chevron could fuel a larger rebound than Noble because of its sizable amount of capital to deploy.

“Weld County could see even more opportunity arise out of Chevron than Noble,” she said. “Look for Chevron to flex its scale and add operations if WTI prices get back above $50-$55 per barrel.”

Many analysts believe oil prices could recover in early 2021, pointing to its prices floating up and down with the rest of the markets on any news of a COVID-19 vaccine breakthrough and the implication that a vaccinated global population would be more willing to travel and consume fuel.

However, Enverus senior analyst Andrew Dittmar said the all-equity offer and relatively low premium offered to take over Noble appears to show Chevron may not be as bullish as one expects out of a company looking to acquire.

“This deal reflects Chevron’s cautious outlook as well,” he said.

Chevron doesn’t appear to view Colorado’s ongoing reform of oil regulations to be a major threat to its viability in Weld County, even though local oil executives and advocates believe Senate Bill 181 is a bigger threat to the local industry than the economic damages of COVID-19.

In response to an analyst question during a conference call this week, Chevron CEO Michael Wirth said Noble’s position in the Denver-Julesburg Basin and its support from Weld County have already shown its ability to handle the regulations already put in place by the sweeping reform bill.

“It’s further from the populated areas in some of the incorporated cities that have been a little more strident on this issue,” he said. “…So, it’s a risk that needs to be managed, but I think it’s one that’s been managed well, and we will continue to uphold that.”

Chevron and Noble expect to produce $300 million in saved costs with the combination, but Johnson thinks the majority of those savings will come from administrative jobs instead of field workers.

“This has implications for overall combined headcount but the field offices will likely remain,” she said.

Noble has field offices in Greeley and Denver. The company did not respond to a BizWest request for comment on current plans for headcount and office presence in the area.

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