Economy

Chevron opts to buy Anadarko Petroleum for $33B

Chevron opts to buy Anadarko Petroleum for $33B

Anadarko has always been rumoured to be a takeover target of the world's largest oil companies, offering a suite of assets including a massive LNG facility in Mozambique that is racing against an Exxon Mobil Corp. project to be first to be operational in the country.

Chevron, Exxon, Royal Dutch Shell Plc and BP Plc largely missed out on the first phase of the shale bonanza, when more nimble independent producers such as Anadarko pioneered shale drilling technology and leased Permian acreage on the cheap.

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

The company will sell US$15 billion to US$20 billion of assets between 2020 and 2022 in order to reduce debt and return additional cash to shareholders.

A Chevron customer looks on as he pumps gas into his vehicle in 2009 in Greenbrae, Calif. Chevron is acquiring Anadarko Petroleum for $33 billion in cash and stock.

"This takes a great company and makes it even better", Chevron's Chairman and CEO Michael Wirth told CNBC's "Squawk Box" immediately after the news broke. That's a premium of 39 per cent to the closing price on Thursday and Anadarko's shares soared in pre-market trading. Chevron stock was down more than 4 percent before the market opened.

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

Occidental Petroleum Corp., fresh off its own failed bid for Anadarko, may now find the tables have turned as its hefty footprint in the world's biggest oil field attracts the attention of acquisitive rivals. Widening the measure to include chemicals and state-owned companies, both would be eclipsed by Saudi Aramco's US$69 billion acquisition of a majority stake in local petrochemical company Sabic this year.

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

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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.

-Chevron said the combined entity would have had daily output of 3.596 million barrels equivalent of oil past year, compared with Shell's 3.666 million.

Investors will receive 0.3869 shares of Chevron and US$16.25 in cash for each Anadarko share.

Analyst firm Rystad Energy said the company has done well with the deal at a value of $50bn (£38.2bn). Oil executives and bankers had in the past speculated that Shell may buy Anadarko because they have adjacent acreage. Before the deal, Chevron shares had gained 25 percent over the last two years, while Anadarko had dropped 23 percent.

"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", Wirth concluded. The total enterprise value of the transaction is $50 billion.

By combining the companies, Chevron expects to cull $1 billion in costs.

Anadarko also has a Mozambique LNG project, part of one of the industry's largest planned current investments, which Wirth said he still expects to move to final approval "sooner rather than later" this year.

Credit Suisse Securities is Chevron's financial adviser, while Paul, Weiss, Rifkind, Wharton & Garrison is its legal adviser.


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