Chevron to buy Anadarko Petroleum for $33-billion in cash and stock
13 April, 2019, 03:25
Shares of Anadarko surged 33 per cent, reflecting the 39 per cent premium offered by Chevron compared to Thursday's closing market price.
The shale oil-and-gas boom reversed a long decline in US crude production and propelled the country to a record 12 million barrels a day (bpd), more than Russian Federation and Saudi Arabia.
With the acquisition, Chevron gets access to Anadarko's liquid natural gas operations in Mozambique. Wirth, who assumed his role in February 2018, expects the deal will allow Chevron to "win in any environment", playing to the company's strengths in shale, deep water and natural gas.
With savings the companies plan to book and rising cash flow, Chevronsaid Friday that it will bump up annual stock buybacks to US$5b, from US$4b a year, once the transaction is complete. Chevron's stock was down about 5% by 12:45 p.m. EDT while Anadarko's skyrocketed 33%. "Oil is on a rebound yet Anadarko's stock price has been stagnant", said Chris Widell, CEO of Sponte Resources, a Dallas, Texas-based private exploration and production company.
The last five years has seen the USA double its domestic oil production and become a rival to Saudi Arabia and Russian Federation as the world's premier supplier. The new company will sell US$15 billion to US$20 billion of assets from 2020 to 2022, to reduce debt and return cash to investors.
Chevron, which already has 2.3 million acres in the Permian Basin, said the combined company would have a 75-mile (120-km)-wide corridor across the Permian's DE basin, on the Texas-New Mexico border.
With the purchase of Anadarko, "we will now see Chevron emerging as the clear leader among all Permian players, both in terms of production growth and as a cost leader", predicts Per Magnus Nysveen, the head of research at Rystad Energy.
Occidental Petroleum Corp, another company with assets in the Permian, bid more than $70 per share for Anadarko and is now considering options, sources said.
Chevron will acquire all outstanding shares of Anadarko in a cash and stock deal for £25.2bn, or $65 per share (£49.71).
Producers in the Permian basin pump around 4 million barrels per day (mbd) and IHS Markit expects it to hit 5.4 mbd in 2023, more than the total production of any OPEC country other than Saudi Arabia.
-The transaction has a break-up fee equivalent to about 3 per cent of the deal value, according to a person familiar with the matter. Chevron will issue about 200 million shares and pay approximately US$8b in cash.
Chevron said the deal would add to its free cash flow and profit one year after closing, if Brent crude, now around $70, holds above $60 per barrel.
The deal, which is subject to shareholder and regulatory approval, is expected to close in the second half of 2019.
Credit Suisse Group AG was financial adviser to Chevron while Paul, Weiss, Rifkind, Wharton & Garrison LLP was legal adviser.
The deal may put pressure on Shell to seek assets in the Permian, where the Anglo-Dutch company has said it wants to grow. It will also assume about $15 billion in debt.
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