Chevron Corp yesterday said it will buy oil and gas producer Anadarko Petroleum Corp for $33bn in cash and stock in a deal that doubles down on its bet on USA shale and propels the company into the ranks of the world's "supermajor" crude producers. 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 U.S. after ExxonMobil. That makes it one of the world's largest independent exploration and production companies.
Chevron, headquartered in California, will "jump ahead of Shell and BP" in size after the merger, he notes.
These companies are turning to shale and its revolutionary techniques of fracking, blasting sand and water into formations to extract oil.
But Anadarko has significant holdings, with the equivalent of 1.5 billion barrels of proved reserves.
"This transaction builds strength on strength for Chevron", said Chairman and CEO Michael Wirth. Chevron also expects shale to generate profits for its pipeline, trading and refining units. "This is really about creating shareholder value", Wirth said in an interview. Chevron stock was down more than 4 percent before the market opened. DNB Asset Management AS increased its stake in Anadarko Petroleum by 15.0% during the 1st quarter.
Chevron shares fell 4.9 percent to $119.76 on Friday. The $65 per share offer was structured as 75 per cent stock and 25 per cent cash.
Phil Flynn, senior market analyst with the PRICE futures group, said it's clear Chevron is investing in the shale revolution.
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.
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.
Analysts predict further consolidation as the smaller companies that revolutionized the industry through advances in horizontal drilling and hydraulic fracking have seen their stock prices languish and have curtailed spending due weak returns.
The deal announced on Friday adds acreage and production in the prolific Permian shale basin of West Texas and southeast New Mexico and expands the company's presence in the Gulf of Mexico. The oil and gas development company reported $0.38 earnings per share (EPS) for the quarter, missing the Thomson Reuters' consensus estimate of $0.57 by ($0.19). It also has operations in the Gulf of Mexico and gas facilities in Africa.
Chevron plans to divest $15 billion to $20 billion in assets between 2020 and 2022, with proceeds used to lower debt and to return additional cash to shareholders, the company said.
"This deal seems flawless".
Although Chevron is well-known consumer brand, with eight refineries and almost 8,000 gas stations, Anadarko is focused on exploration and production of of crude oil and natural gas.
Occidental Petroleum Corp had made a US$70 per share bid for Anadarko and it is now weighing whether to move forward with a counter offer, a person familiar with the matter said.
Pioneer, one of the Permian's largest producers, said in February it plans to reduce 2019 capital expenditures by 11 percent, or about $350 million, in an effort to appease investors.