Chevron (ticker: CVX) bought Noble (NBL) for about $5 billion in stock, and will take on Noble’s $7.5 billion in net debt. Boards of both companies have approved the all-stock deal, but Noble shareholders still need to sign off.

The acquisition gives Chevron a larger area to drill in the Permian Basin, the most-productive oil basin in the United States, as well as new shale acreage in Colorado and elsewhere. Analysts have been relatively positive on the deal -- at worst, it adds only modestly to Chevron’s debt, and at best it allows Chevron to buy new oil reserves at a bargain.

So will other oil companies jump on the bandwagon? One analyst says that is not likely. KeyBanc Capital Markets’ Leo Mariani wrote in a note that there did not appear to be a rush to buy energy assets.

Noble CEO David Stover said on a conference call about the deal that “the company assessed other potential options, including alternative mergers, acquisitions and divestitures, as well as the continued execution of our stand-alone plan.” In the end, Noble agreed to sell for a price that was a 57% discount to its 2020 high, which the stock hit on Jan. 2.

“We see this modest premium to Friday’s close and pretty significant discount to its year to date high as a sign that there likely weren’t many interested parties exploring the purchase of energy assets despite what we think is quite likely a relative low in the cycle for commodity prices,” Mariani wrote.

Given that Noble agreed to sell at such a significant discount after looking for other potential buyers, Mariani suspects that oil companies aren’t looking to make deals.

“I generally think that is the case here as most of the U.S. E&P’s with the better assets in the Permian can wait out this cycle here and wait to see higher oil prices,” Mariani wrote in a follow-up email to Barron’s. “I think Noble may be more of a one-off sale in 2020 here for U.S. E&P.”

Noble did not respond to a request for comment.

It isn’t just the buyers who are wary. Possible target companies may be reluctant to sell at such depressed prices.

“I think other producers don’t want to sell because of low share prices and weak oil prices,” Mariani wrote.

Another sign that M&A may not be coming is that companies previously mentioned as possible acquisition targets didn’t move much on the news. These companies include Matador Resources (MTDR), WPX Energy (WPX), and Laredo Petroleum (LPI).

Write to Avi Salzman at This email address is being protected from spambots. You need JavaScript enabled to view it.


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