Oil giant Chevron has reached a deal to buy all outstanding shares of Noble Energy at $10.38 per share or about $5 billion, a premium of nearly 12% to the 10-day average based on closing stock prices on July 17.

Under the terms of the deal, Noble shareholders will receive 0.1191 shares of Chevron for each Noble Energy share. Including debt, the deal has a total enterprise value of $13 billion.

“Our strong balance sheet and financial discipline gives us the flexibility to be a buyer of quality assets during these challenging times,” Chevron chairman and chief executive officer Michael Wirth said in a statement. “This is a cost-effective opportunity for Chevron to acquire additional proved reserves and resources.”

The deal is one of the largest acquisitions in the energy sector since the COVID-19 pandemic and comes as crude prices remain down more than 30% this year. But analysts say it could signal further merger-and-acquisition activity.

“This is the first wave of acquisitions,” Gianna Bern, a finance professor at the University of Notre Dame’s Mendoza College of Business, said.

Chevron said the deal gives it low-cost, proved reserves, strengthens its positions in the Eastern Mediterranean as well as in the Denver-Julesburg Basin and the Permian Basin, and will provide annual run-rate cost synergies of approximately $300 million.

RBC analyst Scott Hanold, in a research note, said Nobel investors may have been unimpressed with the agreed sale price. “Our conversations with investors indicate that most see the acquisition premium as a bit low and are left wondering why the board of directors sold at that valuation,” Hanold said.

Noble’s stock had a 52-week high of $27.31.

Chevron said on closing it would issue approximately 58 million shares of stock.

The deal is expected to close in the fourth quarter of 2020.

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