Chevron pumped up over $50bn acquisition of Anadarko

Darnell Taylor
April 14, 2019

The company's revenue for the quarter was up 14.3% compared to the same quarter previous year.

"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.

Wirth said Chevron was particularly attracted to Anadarko's high-quality oil assets, from its natural gas assets in Mozambique to the Gulf of Mexico offshore production and its Permian Basin shale. Chevron will also take over Anadarko's 15 $bn debt. CNBC reported Occidental's bid earlier. Mizuho reaffirmed a "buy" rating and issued a $55.00 target price on shares of Anadarko Petroleum in a report on Tuesday, February 12th. He has quickly shaken up the company by announcing an aggressive expansion plan in the Permian.

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

Anadarko employs about 1,100 people in Colorado, but has a much larger presence in Texas.

It is the largest oil and gas deal since Shell bought BG Group in 2015. Widening the measure to include chemicals and state-owned companies, both would be eclipsed by Saudi Aramco's US$69 billion acquisition of a majority stake in local petrochemical company Sabic this year.

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 average premium in such transactions was 11 percent previous year and 22 percent in 2017, data compiled by Bloomberg showed.

"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.

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Giant oil companies such as Chevon, Exxon Mobil, BP and Shell have been searching for new sources of hydrocarbons including natural gas, which introduce less carbon dioxide into the atmosphere.

Anadarko shares surged 32.0 per cent to US$61.78, while Chevron fell 4.9 per cent to US$119.76. That's a premium of 39% to the closing price on Thursday.

-The transaction has a break-up fee equivalent to about 3 per cent of the deal value, according to a person familiar with the matter. The combined company's cash flow past year, US$36.5 billion, would have exceeded Exxon's. Based on Anadarko's closing price of $46.80 on Thursday, Anadarko shareholders will receive 0.3869 shares of Chevron and $16.25 in cash for each Anadarko share.

The new company is to sell US$15 billion to US$20 billion of assets from next year to 2022 to reduce debt and return cash to investors. The enterprise value of the deal is $50 billion. DNB Asset Management AS now owns 2,215,902 shares of the oil and gas development company's stock valued at $100,779,000 after purchasing an additional 289,624 shares in the last quarter. As a group, research analysts expect that Anadarko Petroleum will post 1.66 earnings per share for the current fiscal year.

A Chevron customer looks on as he pumps gas into his auto in 2009 in Greenbrae, Calif. Chevron is acquiring Anadarko Petroleum for $33 billion in cash and stock.

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.

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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