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

Giant oil companies like Chevon have been searching for new sources of energy that introduce less carbon dioxide into the atmosphere

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.

Booming production in that region, powered by a revolution in technology that opened access to shale and other difficult-to-access formations, has turned the USA into an oil-exporting nation.

The sale of Anadarko could likely change that for potential acquirers, including ConocoPhillips and Occidental Petroleum Corp, the two largest USA independents behind the majors.

Chevron shares fell 4.9 percent to $119.76 on Friday.

Chevron has entered into a definitive agreement with Anadarko to acquire all of the outstanding shares of Anadarko in a stock and cash transaction valued at 33 billion USA dollars, or 65 dollars per share, the company said in a statement. Shares of Apache Corp, which also has extensive acreage in the Permian Basin, jumped 7 per cent in premarket trading, while Pioneer Natural Resources Co rose 6 per cent.

It is the largest oil and gas deal since Shell bought BG Group in 2015.

Chevron Corporation, the parent company of Chevron Nigeria Limited (CNL), on Friday announced a definitive agreement to acquire Anadarko Petroleum Corporation.

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.


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

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

"It gives the combined entity the ability to high-grade its assets and focus on where the best cash returns are", Malek said.

The deal may put pressure on Shell to seek assets in the Permian, where the Anglo-Dutch company has said it wants to grow. Mitsubishi UFJ Financial Group cut their price objective on Anadarko Petroleum to $70.00 in a report on Thursday, February 7th.

It comes after the firm said previous year it is seeking to sell all of its Central North Sea assets as it refocuses on the United States shale market. 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 0.3869 shares of Chevron and $16.25 in cash for each share they own, or $65 per share. Measured by cash flow, Chevron said in a statement it would have generated a combined US$36.5 billion with Anadarko previous year, slightly ahead of Exxon's US$36 billion. That means all the shares issued to buy Anadarko will be retired in less than five years.

Credit Suisse Securities is Chevron's financial adviser, while Paul, Weiss, Rifkind, Wharton & Garrison is its legal adviser. Evercore Inc. and Goldman Sachs Group Inc. advised Anadarko alongside law firms Wachtell, Lipton, Rosen & Katz and Vinson & Elkins LLP.

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 US after ExxonMobil.

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