U.S. oil giants in $50bn mega-merger

Lloyd Doyle
April 13, 2019

Chevron announced Friday it will acquire smaller USA rival Anadarko for $33 billion in a deal that strengthens the oil giant's exploration and production holdings in its home market. Exxon had average production previous year of 3.833 million. Chevron and Anadarko said Friday, April 12, 2019 that the deal will create a 75-mile-wide corridor across the most attractive acreage in the DE basin; bolster Chevron's position in the Gulf of Mexico and add a resource base in Mozambique to support growing LNG demand. These have helped make the United States one of the world's largest energy exporters.

"Chevron now joins the ranks of the UltraMajors - and the big three becomes the big four", wrote Roy Martin, senior analyst at Wood Mackenzie, referring to Exxon, Shell and BP.

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 combination of Anadarko's premier, high-quality assets with our advantaged portfolio strengthens our leading position in the Permian, builds on our deep-water Gulf of Mexico capabilities and will grow our LNG business".

Chevron said the combined entity in 2018 would have had output of 3.596 million barrels equivalent of oil, compared with Shell's 3.666 million.

"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.

Chevron's pledge to restrain expenditures has made it a favorite among energy stocks, with its shares up 13.8 percent this year. Chevron fell as much as 5.6 per cent.

Following the transaction announcement, Anadarko's shares surged more than 30 percent in pre-market trade on the NYSE on Friday. That means all the shares issued to buy Anadarko will be retired in less than five years. In that time, USA crude oil prices have risen 20 percent.

The merger would be the sixth largest in the industry and the biggest since Shell bought BG Group for £47... Shares of Noble Energy rose 7 percent, while Pioneer Natural Resources Co jumped more than 11 percent. The combined company will also control a 75-mile-wide corridor across the Delaware Basin, just beside the Permian Basin, a region bountiful with natural gas that has been exploited through shale drilling.

"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 will also assume estimated net debt of $15 billion.

The deal has been approved by both companies' boards and is expected to be finalized later this year.

The acquisition of Anadarko could give Chevron a little more breathing room when crude prices do fall.

The acquisition consideration is structured as 75% stock and 25% cash, providing an overall value of $65/share based on the closing price of Chevron stock on April 11th, 2019.

"This deal seems flawless".

Chevron, valued at $227 billion, is America's second largest oil company, behind the $343 billion Exxon.

Occidental Petroleum Corp., fresh off its own failed bid for Anadarko, may now find the tables have turned as its hefty footprint in the world's biggest oil field attracts the attention of acquisitive rivals.

Chevron expects the deal to add to free cash flow and earnings per share one year after closing, at US$60-a-barrel Brent.

Other reports by Iphone Fresh

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