Chevron (CVX 0.82%) has agreed to acquire Noble Energy (NBL) in an all-stock deal. The oil giant is paying $5 billion in stock for Noble and assuming all its debt, which pushes the total transaction value to $13 billion. 

Noble Energy investors will receive 0.1191 shares of Chevron for each share they currently hold, valuing them at $10.38 each. That implies a 12% premium to the 10-day average closing price.

Two people shaking hands with an offshore oil platform in the background.

Image source: Getty Images.

Chevron sees several benefits to acquiring Noble Energy. The largest is the strong strategic fit, highlighted by 92,000 largely contiguous acres in the Permian Basin near Chevron's assets in the region. Chevron will also bolster its positions in the eastern Mediterranean and West Africa via Noble's offshore assets in Israel and Equatorial Guinea. And Noble Energy will enhance Chevron's North American onshore business by adding land in the DJ Basin and Eagle Ford as well as an integrated midstream business via its stake in Noble Midstream (NBLX).

Chevron believes that the combined company will generate about $300 million of annual pre-tax savings. And it anticipates the transaction will be accretive to its return on capital employed, free cash flow, and earnings per share within one year of closing, assuming a $40 price on Brent crude.

Overall, the addition of Noble Energy accomplishes many of the same objectives of Chevron's failed attempt to acquire Anadarko Petroleum last year, but at a fraction of the cost. It's paying less than $5 per barrel of oil equivalent (BOE) for Noble's proven oil and gas reserves and less than $1.50 per BOE for its resource base of 7 billion BOE.