Chevron on Friday announced plans to acquire oil in addition to gas exploration in addition to production company Anadarko Petroleum in a cash in addition to stock deal valued at $33 billion. The transaction will give the second biggest U.S. energy company a boost in shale oil production as well as natural gas.
Shares of Anadarko rose nearly 30% from the premarket trading to $60.95 a share following the news. Chevron shares were down 4.2% by Thursday’s close of $125.99 a share.
The deal values Anadarko at $65 per share, a 37% premium to its Thursday close. Based on Chevron’s closing cost of $46.80 on April 11, Anadarko shareholders will receive 0.3869 shares of Chevron in addition to $16.25 in cash for each Anadarko share. Chevron will assume $15 billion of Anadarko’s debt.
“This kind of takes a great company in addition to makes the item even better,” Chevron’s Chairman in addition to CEO Michael Wirth told CNBC’s “Squawk Box” immediately after the news broke. “As our company has strengthened its financial situation over recent years, we’re always looking to make our portfolio even stronger.”
Wirth sees $65 per share as a “fair cost” for Anadarko. Wirth, who assumed his role in February 2018, expects the deal will allow Chevron to “win in any environment,” playing to the company’s strengths in shale, deep water in addition to natural gas. He said the company expects the deal to create over $1 billion dollars in synergies.
Chevron will have greatly expanded access to assets as a result of the combination. The deal comes as oil majors like Exxon Mobil look to carve out a dominant position from the Permian basin, the largest U.S. shale field in addition to the driver of a boom in American oil production.
“They take their Permian position up a further level. They get West in addition to East African reserves. They roll their Australian LNG development capability into Mozambique, “Mizuho Securities analyst Paul Sankey said in a note to investors. “in addition to they take down Anadarko’s notoriously lavish Houston HQ.”
Chevron’s Permian production of oil, natural gas in addition to associated liquids hit 16.2 billion barrels of oil equivalent (BOE) in 2018. Anadarko produces about 4 billion BOE by the Permian region, which underlies western Texas in addition to eastern fresh Mexico. The companies say the tie-up creates a 75-mile wide corridor across the Delaware basin portion of the Permian. Stringing together continuous acreage allows companies to more efficiently carry out the advanced drilling methods needed to produce shale oil in addition to gas. which is actually at the heart of Chevron’s Permian strategy. The company is actually bringing industrial scale to shale drilling, once the domain of little, independent wildcatters.
Anadarko also brings more access to deepwater drilling from the Gulf of Mexico, where the company “is actually already a leading producer,” as well as liquefied natural gas (LNG) production, Chevron said.
The deal, which is actually subject to shareholder in addition to regulatory approval, is actually anticipated to close from the second half of 2019. If approved, Chevron said the item plans to boost its annual share buyback program to $5 billion by $4 billion.
Chevron said the item plans to divest $15 billion to $20 billion of assets between 2020 in addition to 2022.
“This kind of transaction will unlock significant value for shareholders, generating anticipated annual run-rate synergies of approximately $2 billion, in addition to will be accretive to free cash flow in addition to earnings one year after close,” Wirth said earlier from the company’s Discharge.
Credit Suisse Securities is actually Chevron’s financial adviser, while Paul, Weiss, Rifkind, Wharton & Garrison is actually its legal adviser. Evercore in addition to Goldman Sachs are financial advisers to Anadarko, while Wachtell, Lipton, Rosen & Katz in addition to Vinson & Elkins LLP are its legal advisers.
Anadarko Petroleum stock has risen 6.8% This kind of year, compared to a 17.6% increase from the S&P 500 Energy index over the same time.
Watch: Full interview with Chevron CEO on plan to acquire Anadarko Petroleum