Chevron To Expand In Permian Basin, Acquiring Anadarko Petroleum For $33 Billion

Data by YCharts

Chevron announced Friday that it will purchase Anadarko Petroleum in a cash-and-stock deal worth $33 billion in what could launch a wave of consolidation as the big oil companies seek to exploit the growing USA shale industry.

The transaction will give the second biggest US energy company a boost in shale oil production as well as natural gas.

Anadarko employs about 1,100 people in Colorado, but has a much larger presence in Texas.

"We don't know where Oxy stock would be right now if they did make that deal", said Jeff Wyll, a senior energy analyst at Neuberger Berman Group LLC, which has $323 billion under management including Chevron and Anadarko shares. The Houston-based company's willingness to ink a sale, rather than capitalize on oil prices rebounding, illustrates the significant challenges facing many United States shale producers.

Under the new arrangement, Chevron plans to divest $15 to $20 billion of assets between 2020 and 2022. The average premium in such transactions was 11 per cent past year and 22 per cent in 2017, according to data compiled by Bloomberg.

Chevron Corporation, the parent company of Chevron Nigeria Limited (CNL), on Friday announced a definitive agreement to acquire Anadarko Petroleum Corporation.

"It gives the combined entity the ability to high-grade its assets and focus on where the best cash returns are", Malek said.

The deal announced Friday comes with US crude prices up 40% this year and vaults Chevron into a new league.

Oil executives and bankers had speculated that Shell might buy Anadarko, because they have adjacent properties.

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It comes after the firm said a year ago it is seeking to sell all of its Central North Sea assets as it refocuses on the USA shale market.

The acquisition is composed of 75 percent stock and 25 percent cash, with Anadarko shareholders receiving 0.39 shares of Chevron and $16.25 in cash for each Anadarko share held.

The total enterprise value of the transaction is $50 billion.

Chevron's takeover of one of the America's biggest independent oil and gas producers is the first major move towards consolidation since the global oil downturn as output from the U.S. shale industry continues to rise. The stock had a trading volume of 102,312,152 shares, compared to its average volume of 4,903,243.

Chevron's purchase of Anadarko at US$65 a share had competition from Occidental Petroleum, which bid $70 a share but whose offer was hindered by "structural issues", CNBC reported, adding that Occidental was considering its options. As a group, equities analysts anticipate that Anadarko Petroleum Co. will post 1.66 earnings per share for the current fiscal year.

-It also expects run-rate cost synergies of US$1 billion before tax and capital spending cuts of US$1 billion.

The deal is expected to close in the second half of the year, subject to Anadarko shareholder approval, regulatory approvals and other customary closing conditions. Credit Suisse Group lowered their price target on shares of Anadarko Petroleum from $73.00 to $67.00 and set an "outperform" rating for the company in a research report on Wednesday, February 6th.

Evercore and Goldman Sachs are financial advisers to Anadarko, while Wachtell, Lipton, Rosen & Katz and Vinson & Elkins LLP are its legal advisers.

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