Published: Sun, April 14, 2019
Money | By Ralph Mccoy

Chevron Is Buying Anadarko Petroleum For $33 Billion

Chevron Is Buying Anadarko Petroleum For $33 Billion

A Chevron gas station sign is pictured at one of their retain gas stations in Cardiff, California October 9, 2013.

Multinational oil giant Chevron will buy the American oil and gas production and exploration company Anadarko Petroleum in a $33 billion cash-and-stock deal that strengthens Chevron's position in the booming Permian Basin.

"Chevron now joins the ranks of the ultramajors", Roy Martin, an analyst at Wood Mackenzie Ltd, said in a note. "The acquisition makes the majors' peer group much more polarized". Forbes' composite ranking method put Chevron as third after Shell and Exxon in Juny, 2018.

These companies are turning to shale and its revolutionary techniques of fracking, blasting sand and water into formations to extract oil. 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.

The agreement is subject to Anadarko stockholder approval and regulatory clearance and is expected to close in the second half of 2019.

"This transaction builds strength on strength for Chevron", said Chevron Chief Executive Mike Wirth. Shell has in the past several months held talks with Endeavor Energy Resources LP, the largest privately owned company in the Permian Basin, which bankers have said might be valued at US$10 billion to US$15 billion. Chevron would also assume $15 billion in debt. Legacy Bridge LLC bought a new position in shares of Anadarko Petroleum in the 4th quarter valued at $43,000. The $65 per share offer was structured as 75 per cent stock and 25 per cent cash.

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Shares of Chevron Corporation dropped about 5 percent, shortly after Friday's opening, while Anadarko stock surged more than 32 percent. In that time, US crude oil prices have risen 20 percent.

This is the biggest takeover in the oil and gas industry since Shell's 47 billion pound (US$61 billion) purchase of BG Group in 2015, according to data compiled by Bloomberg. The stock has a market capitalization of $23.38 billion, a price-to-earnings ratio of 27.34, a P/E/G ratio of 2.33 and a beta of 1.55. Anadarko has a "world-class resource base in Mozambique", Chevron said. Anadarko also has a Mozambique LNG project, part of one of the industry's largest planned current investments. Chevron sees opportunities for ties to Anadarko assets in the Gulf, which involves connecting offshore fields to existing infrastructure.

"This deal seems ideal".

They include oil and gas exploration and production, crude oil and natural gas transports; refining and products marketing and distribution; transportation fuels and lubricants; manufacturing and sale of petrochemicals and additives as well as power generation.

The sale of Anadarko could likely change that for potential acquirers, including ConocoPhillips and Occidental Petroleum Corp, the two largest U.S. independents behind the majors. If approved, Chevron said, it plans to boost its annual share buyback program to $5 billion from $4 billion.

The cash-and-stock transaction is centered on Anadarko's properties in the Permian Basin in Texas and the Gulf of Mexico, two areas where Chevron is already a big player and where economies of scale can help drive value with suppliers and in key drilling and production operations.

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