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In record shale deal, Chevron acquires Anadarko for $33B

16 April 2019
In record shale deal, Chevron acquires Anadarko for $33B

With oil prices surging this year, Chevron and larger rival Exxon Mobil Corp have been increasing investment in the United States' Permian basin in West Texas, the most prolific shale oil field in the country.

Analysts say the deal means Chevron "joins the ranks of the ultra majors", becoming the second-largest producing major in 2019, rising from fourth-largest.

Chevron is paying $33 billion to acquire Anadarko Petroleum in a massive deal that will bolster its natural gas and shale operations.

The merger would be the sixth largest in the industry and the biggest since Shell bought BG Group for £47...

Chevron said it plans to divest $15 billion to $20 billion of assets between 2020 and 2022.

The deal has been approved by both companies' board of directors and remains subject to approval by Anadarko shareholders and customary closing conditions. The oil and gas development company reported $0.38 earnings per share for the quarter, missing the Zacks' consensus estimate of $0.57 by ($0.19).

The enterprise value of deal is $50 billion.

By the end of 2018, Anadarko had 1.47 billion barrels-equivalent of proved reserves.

There has been some pressure in energy markets as OPEC tries to push prices higher through production cuts.

Furthermore, Chevron will be able to access Anadarko's pipeline and processing infrastructure in Texas and the Western US, and to their offshore facilities in the Gulf.

According to CNBC, Occidental Petroleum bid more than $70 a share for Anadarko in cash and stock earlier but the company ultimately made a decision to go with Chevron. Mitsubishi UFJ Financial Group dropped their price objective on shares of Anadarko Petroleum to $70.00 in a research note on Thursday, February 7th.

Until the transaction closes, it's business as usual, and both Chevron and Anadarko will operate as separate companies.

"This transaction builds strength on strength for Chevron", said Chairman and CEO Michael Wirth.

With the acquisition of the independent energy producer company, Chevron will become a more formidable challenger for other of "Big Oil" majors. The average premium in such transactions was 11 percent a year ago and 22 percent in 2017, data compiled by Bloomberg showed. But the deal would have been tougher for Occidental to pull off than for Chevron given its smaller size and narrower range of upstream expertise, potentially dragging down its share price.

U.S. financial services firm Cowen & Co said independent producers expect to spend about 11 percent less in 2019, while major oil companies plan to spend about 16 percent more. Based on Anadarko's closing price of $46.80 on Thursday, Anadarko shareholders will receive 0.3869 shares of Chevron and $16.25 in cash for each Anadarko share. The cash component of the deal is worth about $8 billion, while the equity contribution will be obtained through the issuance of approximately 200 million in Chevron shares.

Chevron said that the deal would enable it to save an annual $1 billion of costs and reduce capital expenditure by $1 billion per year. Credit Suisse Securities (USA) LLC is Chevron's financial adviser, while Paul, Weiss, Rifkind, Wharton & Garrison LLP is its legal adviser. Chevon earned almost $15 billion in 2018 on $166 billion in sales. Evercore Inc. and Goldman Sachs Group Inc. advised Anadarko alongside law firms Wachtell, Lipton, Rosen & Katz and Vinson & Elkins.