US oil giant Chevron to acquire Anadarko for US$33 billion

Sunday, April 14, 2019

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NEW YORK, United States (AFP) — Chevron announced Friday that it will acquire smaller US rival Anadarko for US$33 billion, in a deal that strengthens the oil giant's exploration and production holdings in its home market.

The cash-and-stock transaction is centred on Anadarko's properties in the Permian Basin in Texas and the Gulf of Mexico, two areas where Chevron is already a big player and where economies of scale can help drive value with suppliers and in key drilling and production operations.

Anadarko also has a handful of overseas ventures, including a major liquefied natural gas project in Mozambique that Chevron said would help bolster one of Chevron's major global businesses.

“This transaction builds strength on strength for Chevron,” said Chevron Chief Executive Mike Wirth.

“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.”

For Chevron, the second-biggest US oil company after Exxon Mobil, the takeover of Anadarko marks its biggest deal since its purchase of Texaco, which closed in 2001.

In another transaction, Chevron in 2005 bought Unocal for US$18.3 billion after raising the price during a high-profile bidding war with China's CNOOC, which drew interest from lawmakers in Washington.

The acquisition is composed of 75 per cent stock and 25 per cent cash, with Anadarko shareholders receiving 0.39 shares of Chevron and US$16.25 in cash for each Anadarko share held.

By combining the companies, Chevron expects to cut US$1 billion in costs. The oil giant will also “high grade” its portfolio and sell off some US$15 billion to US$20 billion of assets.

In 2018, Chevron had US$42.4 billion in revenues and pumped 3.1 million barrels of oil-equivalent per day — above the level of most members of the Organization of the Petroleum Exporting Countries. Anadarko had US$13.4 billion in revenues last year and pumped 666,000 barrels of oil equivalent per day.

Anadarko is perhaps best known for being a minority partner on BP's ill-fated Macondo project in Gulf of Mexico, the site of the worst offshore oil spill in US history in 2010 following a well explosion that killed 11 people. In October 2011, Anadarko transferred its interest in Macondo to BP as part of a settlement that resolved claims between the two companies.

Anadarko shares surged 32.1 per cent in pre-market trading to US$61.80, while Chevron fell 3.1 per cent to US$122.10 on Friday.

US stocks lifted by Disney,

At the same time, US stocks surged following news of Disney's new streaming service and Chevron's acquisition. Strong bank earnings also lifted sentiment.

About 25 minutes into trading the Dow Jones Industrial Average stood at 26,404.44, up 1.0 per cent. The broad-based S&P 500 gained 0.7 per cent to 2,908.03, while the tech-rich Nasdaq Composite Index climbed 0.4 per cent to 7,981.51.

Dow member Disney rocketed up 10.7 per cent after announcing it would launch its new video streaming service in the US in November, spotlighting its blockbuster-making studios as it takes on powerhouse Netflix. Shares of Netflix fell 4.2 per cent.

Mid-sized US oil companies Apache, EOG Resources and Devon Energy all gained more than four per cent after Chevron announced it would acquire Anadarko Petroleum, spurring speculation of other big deals in the industry.

JPMorgan Chase jumped 4.1 per cent after announcing better-than-expected first-quarter earnings and touting the continued strength of the US economy.

Rival bank Wells Fargo rose 1.7 per cent after its results also topped expectations. The strong results also pushed up Bank of America, Goldman Sachs and other banks.

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