Anadarko could opt to negotiate with Occidental instead of Chevron

Occidental Chevron Anadarko

Anadarko Petroleum Corp decided to begin negotiations to sell itself to Occidental Petroleum Corp after receiving a $38 billion cash-and-stock bid on April 24, 2019. The company determined it could strike a better deal than the one with Chevron Corp, with made a bid for $33 billion on April 11, 2019.

The announcement constitutes a breakthrough after two years of efforts from Occidental chief executive Vicki Hollub to purchase Anadarko. This company is one of the top O&G producers in the United States in the lucrative Permian basin in Texas and New Mexico.

The battle for the Permian Basin

Anadarko is one of the largest independent oil producers in the United States and has been the object of speculations over possible mergers for some time. The acquisition would be the biggest transaction in the oil sector in at least four years. The company’s activities are spread across three continents, but the true prize are its assets in the prolific Permian Basin in West Texas and New Mexico. Production at this site is on the rise and a consolidation between industry players in the horizon.

The Permian Basin has turned into one of the world’s main oil production sites. The area is estimated to already produce as much crude as Iran and Venezuela together. It has also propelled the U.S. to surpass Saudi Arabia as the number one oil producer and become a net exporter.

The spectacular development of the Permian Basin came about thanks to small and medium oil companies that have developed this area using fracking. More recently, it has also received billion-dollar investments from the oil majors.

The majors had a late arrival to the shale oil boom, leaving the initial work to independent drillers like Anadarko and EOG Resources. But ExxonMobil, Chevron, and BP have spent billions over the past years to catch up and are now among the shale industry’s top players.

With the purchase of Anadarko, Occidental would increase its production in the lucrative Permian Basin to 533,000 crude barrels per day, the firm said

Chevron waits and sees

After consulting with financial and legal advisors, Anadarko’s Board of Directors unanimously determined that Occidental’s proposal could result in a “superior proposal,” as defined in its merger agreement with Chevron.

Occidental’s proposal reflects “significant improvement with respect to the indicative value, terms and conditions, and closing certainty as compared to any previous proposal” Occidental made to Anadarko, the firm said in its statement.

Under this proposal, Occidental has offered $38 in cash and 0.6094 of its shares for each share of Anadarko.

Meanwhile, Under Chevron’s bid, Anadarko shareholders would receive 0.3869 share of Chevron and $16.25 in cash for each Anadarko share.

However, the deal with Chevron is still in force until the company decides if it will close a new deal with Occidental, the statement added.

Anadarko has chosen Evercore and Goldman Sachs & Co. LLC as financial advisors, while Wachtell, Lipton, Rosen & Katz provide legal counseling.

Occidental and Anadarko to form a new energy giant

“We hope Anadarko will proceed quickly to secure this superior transaction for its shareholders,” an Occidental spokeswoman said.

In addition to the Permian Basin, Anadarko owns shale assets in Colorado, as well as valuable deep water drilling sites in the Gulf of Mexico. It is also present in Mozambique, where it manages a liquefied gas project.

For its part, Occidental informed that the Anadarko purchase would create an energy giant worth more than $100 billion with a production of over 1.4 million barrels per day.

For more information, check Energía16

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