Chevron to buy Anadarko Petroleum for $33-billion in cash and stock

Posted April 16, 2019

The combined Chevron and Anadarko businesses will make up one of the largest operators in the USA shale basins at a time when America pumps out more crude oil than Saudi Arabia and Russian Federation, the Wall Street Journal reports.

Chevron, which already has 2.3 million acres in the Permian Basin, said the combined company would have a 75-mile (120-km)-wide corridor across the Permian's DE basin, on the Texas-New Mexico border.

With the acquisition, Chevron gets access to Anadarko's liquid natural gas operations in Mozambique.

Chevron plans to sell $15 billion to $20 billion of assets between 2020 and 2022 in order to cut debt and return cash to shareholders, including raising the pace at which it is buying back more shares.

-The deal is seen closing in the second half of the year, subject to Anadarko shareholder and regulatory approvals. The company had a trading volume of 102,312,152 shares, compared to its average volume of 4,903,243.

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

In that time, US crude oil prices have risen 20 percent.

Guyana could see oil exploration activity in the ultra-deepwater region picking up pace in the near future with United States oil giant Chevron set to buy Anadarko Petroleum Corp, which holds an exploration licence for the Roraima Block offshore Guyana. That makes it one of the world's largest independent exploration and production companies.

Anadarko shares leaped 32% on Friday to $61.78, but they didn't trade above the offer price, implying investors don't expect a bidding war. Mitsubishi UFJ Financial Group dropped their price target on shares of Anadarko Petroleum to $70.00 in a research report on Thursday, February 7th.

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Chevron's chairman and CEO, Michael Wirth, celebrated the agreement as a transaction that "builds strength on strength for Chevron".

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

Under the terms of the agreement, Anadarko shareholders will receive $16.25 in cash and 0.3869 shares of Chevron for each Anadarko share they own. Stringing together continuous acreage allows companies to more efficiently carry out the advanced drilling methods needed to produce shale oil and gas. 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. If approved, Chevron said, it plans to boost its annual share buyback program to $5 billion from $4 billion. 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. Chevon earned almost $15 billion in 2018 on $166 billion in sales. Finally, Credit Suisse Group lowered their price objective on shares of Anadarko Petroleum from $73.00 to $67.00 and set an "outperform" rating on the stock in a research report on Wednesday, February 6th.

Evercore and Goldman Sachs are financial advisers to Anadarko, while Wachtell, Lipton, Rosen & Katz and Vinson & Elkins LLP are its legal advisers.

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