Published: Sun, April 14, 2019
Markets | By Otis Pena

USA oil giant Chevron says will acquire Anadarko for $33 billion

USA oil giant Chevron says will acquire Anadarko for $33 billion

Chevron introduced on Friday it would purchase oil and fuel driller Anadarko Petroleum in a money and inventory deal valued at $33 billion, marking one of many largest vitality sector mergers in years and a transformative second for one of many business's dominant gamers.

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.

The acquisition comes as the USA has reversed a decades-long decline in oil production, thanks to new technology that has allowed it to tap hitherto unreachable, so-called "tight oil", that had been locked deep beneath the surface in shale rock.

This is the biggest takeover in the oil and gas industry since Royal Dutch Shell Plc's US$61 billion bid for BG Group in 2015, according to data compiled by Bloomberg.

"It creates attractive growth opportunities in areas that play to Chevron's operational strengths and underscores our commitment to short-cycle, higher-return investments".

Chevron is buying Anadarko Petroleum for $33 billion, energizing its oil and gas drilling capabilities in Texas and the Gulf of Mexico while vaulting itself into a new league. The average premium in such transactions was 11 per cent previous year and 22 per cent in 2017, according to data compiled by Bloomberg.

"Consolidation in deep water and the shales makes complete industrial sense", said Christyan Malek, the head of EMEA oil and gas research at JPMorgan Chase & Co.

Before the deal, Chevron shares had gained 25 percent over the last two years, while Anadarko had dropped 23 percent.

The deal may put pressure on Shell to seek assets in the Permian, where the Anglo-Dutch company has said it wants to grow.

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Oil executives and bankers had speculated that Shell might buy Anadarko, because they have adjacent properties. The combined company will produce an estimated 3.9 million barrels of oil equivalent per day (boepd), trailing only Exxon Mobil Corp among publicly traded companies, up from fourth. Mitsubishi UFJ Financial Group cut their price objective on Anadarko Petroleum to $70.00 in a report on Thursday, February 7th.

Chevron's pledge to restrain expenditures has made it a favorite among energy stocks, with its shares up 13.8 percent this year.

Anadarko submitted the second most applications for permits to begin drilling in Wyoming previous year, but it trailed behind in actual production.

Chevron says it will also assume estimated net debt of $15 billion, with total enterprise value of $50 billion, including the assumption of net debt and book value of non-controlling interest.

Anadarko shareholders will receive 0.3869 shares of Chevron and $16.25 in cash for each share they own, or $65 per share.

Chevron also said it plans to raise annual share buybacks to $5 billion from $4 billion when the deal closes and to sell $15 billion to $20 billion of assets between 2020 and 2022. Chevron will issue about 200 million shares and pay approximately $8 billion in cash.

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 AG was financial adviser to Chevron while Paul, Weiss, Rifkind, Wharton & Garrison LLP was legal adviser. Anadarko was advised by Evercore and Goldman Sachs.

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