Chevron announced Friday that it will purchase Anadarko Petroleum in a cash-and-stock deal worth $33 billion in what could launch a wave of consolidation as the big oil companies seek to exploit the growing USA shale industry.
Anadarko had $13.4 billion in revenues past year and pumped 666,000 barrels of oil equivalent per day. It will also enable the company to leverage its LNG expertise in Australia to develop Anadarko's world-class gas resource in Mozambique. That makes it the 11th-largest deal ever in the energy and power markets. The transaction vaults Chevron into the rarefied air of rivals Exxon Mobil Corp. and Royal Dutch Shell Plc, which in turn may be roused to make acquisitions of their own.
These companies are turning to shale and its revolutionary techniques of fracking, blasting sand and water into formations to extract oil.
The transaction will give the second biggest US energy company a boost in shale oil production as well as natural gas. It estimates that the combined company can drive out $1 billion in annual costs.
"This transaction builds strength on strength for Chevron", said Chairman and CEO Michael Wirth.
Wirth, 58, took over as chief executive 14 months ago, with a reputation for keen attention to costs earned from running Chevron's pipeline and trading units, and almost a decade in charge of its refining business.
Some of Anadarko's assets may be sold after the deal closes, the company said.
Chevron's pledge to restrain expenditures has made it a favorite among energy stocks, with its shares up 13.8 percent this year.
Anadarko shares surged 32.1 percent in pre-market trading to $61.80, while Chevron fell 3.1 percent to $122.10. That is at the heart of Chevron's Permian strategy. The oil giant also expects to streamline its portfolio by selling between $15 billion and $20 billion of assets.
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Analysts say the deal means Chevron "joins the ranks of the ultra majors", becoming the second-largest producing major in 2019, rising from fourth-largest. Shares of Noble Energy rose 7 percent, while Pioneer Natural Resources Co jumped more than 11 percent.
The combination will create 75-mile-wide corridor in the oil-rich Permian and add to Chevron's already significant natural gas holdings, which extend from its giant Gorgon field off the northwest coast of Australia to Africa and the United States.
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.
The deal is expected to close in the second half of the year. It's also a major producer in the Gulf of Mexico.
Chevron will acquire all outstanding shares in Anadarko for US$65 each, paying with a mixture of cash and its own stock.
"This deal seems flawless". It still needs approval from shareholders of Anadarko Petroleum Corp. and regulators.
-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.
Anadarko shareholders will receive 0.3869 shares of Chevron and $16.25 in cash for each Anadarko share.