Chevron Makes Buyout Offer For Noble Midstream; Street Sees 18% Upside Potential

US energy giant Chevron Corp has offered to buy all of the shares it doesn’t already own in pipeline operator Noble Midstream Partners LP.

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Chevron (CVX) has proposed to buy Noble Midstream at a value of $12.47 per common unit, based on the most recent closing price on Feb. 4. Shares of Noble Midstream Partners closed 6.7% higher and closed at $13.30 on Feb. 5.

The parties will enter into negotiations to formulate the definitive terms of the agreement, which will be subject to the approval by Noble Midstream’s (NBLX) Board of Directors. The proposed deal comes after Chevron closed the $4.1 billion takeover of Noble Energy, which has a majority holding in Noble Midstream.

Chevron said it “expects the proposed transaction to align long term interests by efficiently combining two highly integrated businesses while streamlining governance of the NBLX assets, which primarily serve Chevron as its largest customer.”

Noble Midstream is a limited partnership originally formed by Noble Energy to own, operate, develop and buy domestic midstream infrastructure assets. NBLX provides crude oil, natural gas, and water-related midstream services and owns equity interests in oil pipelines in the DJ Basin in Colorado and the Delaware Basin in Texas. NBLX operations were integrated into Chevron in 2020 following the closure of the Noble Energy acquisition.

On Jan. 29, Raymond James analyst Justin Jenkins reiterated a Buy rating on the stock with a price target of $112 (25% upside potential) as he argues that Chevron has the strongest financial base among oil majors and an attractive relative asset portfolio.

“Chevron offers the most straightforwardly positive risk/reward. Efficiency drivers are set to improve profitability into 2021, while a “block and tackle” capital program over the next few years should further improve competitiveness, even without more help from the macro environment,” Freeman wrote in a note to investors.

“Although current conditions do not warrant a large focus on production growth, Chevron possesses numerous medium-term drivers (Noble integration, Permian, Gulf of Mexico exploration, Vaca Muerta, etc.) that we see supporting production levels in the coming years,” the analyst added. (See Chevron stock analysis on TipRanks)

With shares up 25% over the past three months, Wall Street analysts are cautiously optimistic on the stock’s outlook. The Moderate Buy consensus rating breaks down into 10 Buy ratings versus 4 Hold ratings. The average analyst price target stands at 105.08, indicating 18% upside potential from current levels over the next 12 months.