Stirring in the oil patch, Chevron buys Noble for $5 billion | Canada News Media
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Stirring in the oil patch, Chevron buys Noble for $5 billion

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Chevron will take over Noble Energy for $5 billion in the first big deal announced since the coronavirus pandemic shook the energy sector.

Chevron has been shopping for assets since last year and with crude prices down more than 30% this year, it jumped Monday with its all-stock offering for the independent Houston oil and gas driller.

Based on Chevron’s closing price on Friday, Noble Energy shareholders will receive 0.1191 shares of Chevron for each Noble Energy share. But with the list price comes a lot of debt.

Energy companies had been taking on enormous debt even before the pandemic and energy prices have bouncing all over the place. Noble is no exception.

The total enterprise value of the deal is $13 billion, with Chevron assuming Noble’s debt.

Last year, as it pursued potential buyout targets, Chevron lost out when Occidental Petroleum made a $38 billion deal for one of them, Anadarko, even though Chevron is five times the size of Occidental.

While Occidental’s valuable holdings in the Permian Basin of west Texas and New Mexico appeared to be a good match, Chevron said at the time that it favoured discipline over “winning at any cost.”

It’s found another match in Noble Energy.

The acquisition brings to Chevron low-cost, proven reserves in addition to cash-generating offshore assets in Israel, strengthening the company’s position in the Mediterranean. Noble’s portfolio will also add to Chevron’s U.S. acreage in the Permian Basin and in Colorado’s DJ Basin.

“Noble Energy’s multi-asset, high-quality portfolio will enhance geographic diversity, increase capital flexibility, and improve our ability to generate strong cash flow,” said Chevron Chairman and CEO Michael Wirth. “These assets play to Chevron’s operational strengths, and the transaction underscores our commitment to capital discipline.”

That discipline is mandatory for any company in the energy sector this year.

On Monday, energy services company Halliburton reported a quarterly loss of about $1.7 billion, and that was better than industry analysts had expected. The 57% plunge in revenue was not.

Energy demand has bounced back as economies reopen globally. U.S. crude prices that fell for first four months of the year are gaining ground, and have been positive since May. It appears prices may remain positive for July, but prices are seesawing and the longest positive streak this month has been two days.

Surging cases of COVID-19 in the U.S., the world’s largest economy, now threaten to hamstring an industry already hit hard by layoffs.

Chesapeake Energy, a shale drilling pioneer that was once one of the largest natural gas producers in the world, filed for bankruptcy protection last month.

Shares in Noble jumped almost 12% before the opening bell Monday, while crude prices are giving ground and may fall below $40 per barrel again.

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Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

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Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.

The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.

“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

The Canadian Press. All rights reserved.

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