Published: Sun, April 14, 2019
Finance | By Loren Pratt

Chevron to acquire Anadarko in £38.2bn deal

Chevron to acquire Anadarko in £38.2bn deal

It expands Chevron's reach in two areas where US energy output is breaking records: shale from the Permian Basin of west Texas and New Mexico, and liquefied natural gas (LNG).

The transaction will broaden the second highest USA vitality firm's operations in US shale oil and gasoline manufacturing, offshore drilling and liquefied pure fuel exports.

At $33 billion, Chevron Corp.'s acquisition of Anadarko Petroleum something of a bargain, according to investors.

Chevron shares fell 4.9 percent to $119.76 on Friday.

The company said will boost its share repurchase rate by US$1 billion to US$5 billion per year upon closing of the deal. The company explores for and produces oil, natural gas, and natural gas liquids (NGLs).

Shares of Anadarko surged 33 per cent, reflecting the 39 per cent premium offered by Chevron compared to Thursday's closing market price.

"We will now see Chevron emerging as the clear leader among all Permian players, both in terms of production growth and as a cost leader", said Rystad Energy head of analysis Per Magnus Nysveen, noting that Anadarko's acreage is in the "sweetest spot" of the Delaware Basin. Officials at Chevron told Stabroek News that when the deal closes, the Anadarko-own-ed Roraima Block would form a part of its assets. "It gives the combined entity the ability to high-grade its assets and focus on where the best cash returns are". It also plans to sell assets worth up to $20 billion between 2020 and 2022, the company said.

Oil executives and bankers had speculated that Shell might buy Anadarko, because they have adjacent properties. Exxon reported average production a year ago of 3.833 million.

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. The deal comes as oil majors like Exxon Mobil look to carve out a dominant position in the Permian basin, the largest USA shale field and the driver of a boom in American oil production.

Anadarko shareholders will receive 0.38 shares of Chevron and $16.25 (£12.43) in cash for each of their shares.

In another big transaction, Chevron in 2005 bought Unocal for US$18.3 billion after raising the price during a high-profile bidding war with China's CNOOC that drew interest from lawmakers in Washington. Chevron stock was down more than 4 percent before the market opened. As a group, research analysts expect that Anadarko Petroleum will post 1.66 earnings per share for the current fiscal year.

The company plans to add rigs for the Anadarko acreage, but still estimated a US$1 billion reduction of the combined capital spending of the two companies because of economies of scale, he added. 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. Anadarko was advised by Evercore and Goldman Sachs.

When the acquisition is approved sometime in the second half of 219, the Chevron steps one place higher and becomes the second largest oil-and-gas company of the United States of America after ExxonMobil.

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