Chevron to buy Anadarko Petroleum in $48 billion mega deal

Daniel Fowler
April 13, 2019

Under the terms of the agreement, Anadarko shareholders will receive 0.3869 shares of Chevron and $16.25 in cash for each Anadarko share. It will also assume about $15 billion in debt.

-Chevron will acquire all outstanding Anadarko shares for US$65 each, paying a mixture of cash and stock.

Chevron Chief Executive Officer Mike Wirth said the deal offers a "compelling and unique fit" because the companies operate in similar areas, both with holdings in shale, offshore, and LNG projects.

Wirth sees $65 per share as a "fair price" for Anadarko.

As of February 2018, Anadarko was the largest oil and gas producer in Weld County.

The takeover puts Chevron neck-and-neck with the oil and gas production of Exxon Mobil Corp. and Royal Dutch Shell Plc, both of which have dominated Big Oil over the past decade.

"They take their Permian position up a further level".

Last month, Chevron said it expects shale production from the basin to reach 600,000 barrels per day (bpd) by the end of next year.

Anadarko is perhaps best known for being a minority partner on BP's ill-fated Macondo project in Gulf of Mexico, the site of the worst offshore oil spill in USA history in 2010 following a well explosion that killed 11 people.

Shale and Tight. The combination of the two companies will create a 75-mi-wide corridor across the most attractive acreage in the DE basin, extending Chevron's leading position as a producer in the Permian basin.

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As oil companies have become more efficient at producing shale oil, which has changed the global equation by making US oil a rival against the cheap oil produced by Organization of the Petroleum Exporting Countries.

Analysts predict further consolidation as the smaller companies that revolutionized the industry through advances in horizontal drilling and hydraulic fracking have seen their stock prices languish and have curtailed spending due weak returns.

Anadarko, which is based in The Woodlands, Texas, has always been rumored as a takeover target for the world's largest oil companies, offering a suite of assets including a massive LNG facility in Mozambique that's racing against Exxon's project to be the first operating in the country. Anadarko now operates 10 facilities in the Gulf.

"We are the best company to combine with Anadarko and Anadarko is the best company to combine with us", Wirth said in an interview. Drillers have increasingly turned to the low-priced strategy to avoid the massive expense of building multibillion dollar deepwater platforms.

With the acquisition, Chevron gets access to Anadarko's liquid natural gas operations in Mozambique.

LNG. Chevron will gain another world-class resource base in Mozambique to support growing LNG demand.

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. The oil giant will also "high grade" its portfolio and sell off some $15 billion to $20 billion of assets. Chevron fell as much as 5.6 per cent.

"This transaction will unlock significant value for shareholders, generating anticipated annual run-rate synergies of approximately $2 billion, and will be accretive to free cash flow and earnings one year after close", he added.

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

Anadarko Petroleum stock has risen 6.8% this year, compared with a 17.6% increase in the S&P 500 Energy index over that period.

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