Chevron Corp said on Friday it will buy oil and gas producer Anadarko Petroleum Corp for $33 billion. With this, the California-based company strengthens its position in shale oil and LNG production. It will be the biggest merger in the industry since Royal Dutch Shale purchased BG Group in 2016.
With the oil price hike this year, Chevron and its largest rival Exxon Mobil have been doubling investments in the U.S. Permian Basin, one of the main centers of shale oil exploration.
Chevron stated that the purchase of Anadarko, one of the main independent producers in the United States, would provide the company a 120-kilometer-wide corridor across the Delaware basin, as well as its LNG project in Mozambique, which is currently part of one of the largest investment plans in the industry.
The transaction will be made in stock and cash, Chevron said, adding that it will absorb Anadarko’s debt.
On the acquisition of Anadarko, CEO Mike Wirth: “This is a compelling transaction that reinforces Chevron’s commitment to win in any environment.” https://t.co/9zqCYEVxbV . Cautionary statement: https://t.co/bAPZH3oWRS pic.twitter.com/tlUYrda3gz
— Chevron (@Chevron) 12 de abril de 2019
Strengthening the business
This purchase “strengthens Chevron,” CEO Michael Wirth said. “The combination of Anadarko’s premier, high-quality assets with our advantaged portfolio strengthens our leading position in the Permian, builds on our deepwater Gulf of Mexico capabilities and will grow our LNG business,” he added.
— Bloomberg (@business) 12 de abril de 2019
“The strategic combination of Chevron and Anadarko will form a stronger and better company with world-class assets, people and opportunities,” said Anadarko Chairman and CEO Al Walker. “I have tremendous respect for Mike and his leadership team and believe Chevron’s strategy, scale, and operational capabilities will further accelerate the value of Anadarko’s assets,” he stressed.
Benefits for Chevron with the Anadarko purchase
According to both companies, the merger would create a 75-mile-wide corridor across the most attractive surface of the Delaware basin, extending Chevron’s leadership in the Permian Basin.
On the other hand, it would also improve the company’s current high-profile deepwater investments in the Gulf of Mexico. Furthermore, the California-based firm will obtain significant LNG resources in Mozambique to support growing hydrocarbon demand.
With the addition to its free cash flow, Chevron is planning to increase annual share buybacks to $5 billion from $4 billion a year when the deal closes.
Chevron to acquire Anadarko’s shares and debt
With the final purchase agreement, Chevron is set to buy Anadarko Petroleum Corporation’s outstanding shares for $33 billion or $65 per share, based on the closing price of Chevron stock on April 11, 2019.
The acquisition consideration is structured as 75 percent stock and 25 percent cash. Overall, upon closing of the transaction, Chevron will issue approximately 200 million shares of stock and pay approximately $8 billion in cash. Chevron will also assume the company’s $15 billion debt.
Chevron’s $50bn acquisition of Anadarko will lift it to the top tier of western oil and gas producers. Combined production of about 3.6m boe / d in 2018, compared to 3.8m for Exxon and 3.7m for Shell pic.twitter.com/pTthxlc6h8
— Ed Crooks (@Ed_Crooks) 12 de abril de 2019
The purchase was greenlit by both companies’ Board of Directors and is set to be completed during the second half of the year. The purchase is subject to Anadarko shareholder approval. It must also have regulatory approval and other standard conditions for this type of transactions.
Following the purchase of Anadarko, Michael Wirth will continue to lead the company as Chairman and CEO. Also, it will still be based in san Ramon, California.
For more information, check Energía16