Chevron Is Dealing With Anadarko Petroleum Stocks- Strategy Is To Buy

Mae Love
April 14, 2019

These companies are turning to shale and its revolutionary techniques of fracking, blasting sand and water into formations to extract oil.

Oil prices have been on the rise as OPEC members cut production.

It also increases its exposure to LNG at a time when the fight against climate change is making natural gas the preferred fuel.

The deal is expected to close in the second half of 2019.

Chevron's chairman and CEO, Michael Wirth, celebrated the agreement as a transaction that "builds strength on strength for Chevron". Chevron also expects shale to generate profits for its pipeline, trading and refining units.

USA financial services firm Cowen & Co said independent producers expect to spend about 11 percent less in 2019, while major oil companies plan to spend about 16 percent more. Chevron stock was down more than 4 percent before the market opened.

Chevron said it is an opportunity to "high-grade" its portfolio and plans to divest between £11.4bn and £15.2bn of assets between 2020 and 2022, with proceeds used to reduce debt and return cash to shareholders.

Chevron shares fell 4.9 percent to $119.76 on Friday.

The $65-a-share offer for Anadarko represents a 39% premium to Thursday's price, but the stock traded at about $77 less than a year ago.

The deal announced Friday comes with USA crude prices up 40% this year and vaults Chevron into a new league.

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The merger would be the sixth largest in the industry and the biggest since Shell bought BG Group for £47...

California-based Chevron is one of the largest oil companies in the world, based on its $228 billion market capitalization, and the second-biggest in the United States after Exxon Mobil. The company is bringing industrial scale to shale drilling, once the domain of small, independent wildcatters.

Chevron, which already has 2.3 million acres in the Permian Basin, said the combined company would have a 75-mile (120-km)-wide corridor across the Permian's DE basin, on the Texas-New Mexico border.

"We will now see Chevron emerging as the clear leader among all Permian players, both in terms of production growth and as a cost leader", said Per Magnus Nysveen, head of research at consultant Rystad Energy AS in Oslo. He estimated Chevron is paying about $50,000 an acre for Anadarko's west Texas holdings. Anadarko also has a Mozambique LNG project, part of one of the industry's largest planned current investments.

Furthermore, Chevron will be able to access Anadarko's pipeline and processing infrastructure in Texas and the Western US, and to their offshore facilities in the Gulf.

Chevron has entered into a definitive agreement with Anadarko to acquire all of the outstanding shares of Anadarko in a stock and cash transaction valued at 33 billion USA dollars, or 65 dollars per share, the company said in a statement.

"This deal seems ideal". The basin accounts for the 20% of crude oil and 7% of natural gas extracted in the US.

Occidental Petroleum Corp had made a US$70 per share bid for Anadarko and it is now weighing whether to move forward with a counter offer, a person familiar with the matter said.

With savings the companies plan to book and rising cash flow, Chevron said Friday that it will bump up annual stock buybacks to $5 billion, from $4 billion a year, once the transaction is complete.

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