Chevron Inks Deal To Buy Noble Midstream Partners; Shares Gain 4%

Chevron Corporation has agreed to snap up master limited partnership Noble Midstream in an all-stock deal to simplify governance and corporate structure. Shares of the global energy company increased 4.3% to close at $109 on March 5.

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Per the terms of the deal, Chevron (CVX), which has majority holdings in Noble Midstream, will acquire all 33.925 million of the publicly held common units, representing the limited partner interests in Noble Midstream. Notably, these units are not owned by Chevron.

Unitholders of Noble Midstream (NBLX) will receive 0.1393 shares of Chevron common stock for each unit held. The transaction, which awaits certain customary approvals, is likely to close in the second quarter of this year.

Chevron VP Colin Parfitt said, “We believe this buy-in transaction is the best solution for all stakeholders, enabling us to simplify the governance structure and capture value in support of our leading positions in the DJ and Permian basins.” (See Chevron stock analysis on TipRanks)

On Feb. 16, Credit Suisse analyst Manav Gupta increased the stock’s price target to $115 (5.5% upside potential) from $110 and maintained a Buy rating. The analyst noted, “Chevron is fully committed to dividend growth and even buybacks.”

Based on his current estimates, Gupta believes Chevron will fully cover the dividend and generate “over $4.5B in discretionary free cash flow in 2021.”

The consensus rating among analysts is a Strong Buy based on 10 Buys versus 3 Holds. The average analyst price target stands at $107.42 and implies downside potential of about 1.5% to current levels over the next 12 months. Shares have gained 35% over the past year.

Chevron scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.