Occidental challenged Chevron’s initial bid last month, offering $57 billion in cash and stock, including debt and book value of non-controlling interest. Chevron’s offer was worth about $50 billion by the same metric.
Chevron will not make a counterproposal to Occidental, a smaller company than Chevron that nonetheless offered a higher, $76-per-share cash-and-stock bid for Anadarko.
SHOTS FIRED @ Occidental Petroleum
“Winning in any environment doesn’t mean winning at any cost. Cost and capital discipline always matter, and we will not dilute our returns or erode value for our shareholders for the sake of doing a deal,” Chevron CEO Michael Wirth said in a statement.
Under the terms of the initial agreement between Chevron and Anadarko, the San Ramon, California-based company is entitled to a $1 billion termination fee.
Chevron gives up on Anadarko Petroleum, will get $1B termination fee
The decision leaves Occidental as a victor in a race that once again demonstrated the attractiveness of the American shale.
The decision also means Chevron will collect a $1 billion breakup fee, a windfall that it could use to purchase another driller in the Permian Basin, the engine of the American oil drilling boom.
Occidental Petroleum Corporation (Occidental) is an oil and gas exploration and production company. The Company operates through three segments: oil and gas, chemical (OxyChem), and midstream and marketing. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGLs) and natural gas.
Chevron moves to Acquire Anadarko Petroleum for $33 Billion
Chevron Corporation (NYSE: CVX) announced today that it has entered into a definitive agreement with Anadarko Petroleum Corporation (NYSE: APC) to acquire all of the outstanding shares of Anadarko in a stock and cash transaction valued at $33 billion, or $65 per share. Based on Chevron’s closing price on April 11, 2019 and under the terms of the agreement, Anadarko shareholders will receive 0.3869 shares of Chevron and $16.25 in cash for each Anadarko share. The total enterprise value of the transaction is $50 billion.
The deal makes Chevron the second-largest major by crude production, behind Exxon Mobil Corp, up from fourth. It expands Chevron’s reach in two areas where US energy output is surging – shale from the Permian Basin of west Texas and New Mexico, and liquefied natural gas (LNG) – which have helped make the US one of the world’s largest energy exporters.
“Chevron now joins the ranks of the ‘ultra-majors’
The acquisition of Anadarko will significantly enhance Chevron’s already advantaged Upstream portfolio and further strengthen its leading positions in large, attractive shale, deepwater and natural gas resource basins. Furthermore, Western Midstream Partners, LP (NYSE: WES) is a successful midstream company whose assets are well aligned with the combined companies’ upstream positions, which should further enhance their economics and execution capabilities.
“This transaction builds strength on strength for Chevron,” said Chevron’s Chairman and CEO Michael Wirth. “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. It creates attractive growth opportunities in areas that play to Chevron’s operational strengths and underscores our commitment to short-cycle, higher-return investments.”
“This transaction will unlock significant value for shareholders, generating anticipated annual run-rate synergies of approximately $2 billion, and will be accretive to free cash flow and earnings one year after close,” Wirth concluded.
“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.”
Strong Strategic Fit: Anadarko’s assets will enhance Chevron’s portfolio across a diverse set of asset classes, including:
Shale & Tight – The combination of the two companies will create a 75-mile-wide corridor across the most attractive acreage in the Delaware basin, extending Chevron’s leading position as a producer in the Permian.
Deepwater – The combination will enhance Chevron’s existing high-margin position in the deepwater Gulf of Mexico (GOM), where it is already a leading producer, and extend its deepwater infrastructure network.
LNG –Chevron will gain another world-class resource base in Mozambique to support growing LNG demand. Area 1 is a very cost-competitive and well-prepared greenfield project close to major markets.
Significant Operating and Capital Synergies: The transaction is expected to achieve run-rate cost synergies of $1 billion before tax and capital spending reductions of $1 billion within a year of closing.
Accretive to Free Cash Flow and EPS: Chevron expects the transaction to be accretive to free cash flow and earnings per share one year after closing, at $60 Brent.
Opportunity to High-Grade Portfolio: Chevron plans to divest $15 to $20 billion of assets between 2020 and 2022. The proceeds will be used to further reduce debt and return additional cash to shareholders.
Increased Shareholder Returns: As a result of higher expected free cash flow, Chevron plans to increase its share repurchase rate from $4 billion to $5 billion per year upon closing the transaction.
The acquisition consideration is structured as 75 percent stock and 25 percent cash, providing an overall value of $65 per share based on the closing price of Chevron stock on April 11, 2019. In aggregate, 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 an estimated net debt of $15 billion. Total enterprise value of $50 billion includes the assumption of net debt and book value of non-controlling interest.
The transaction has been approved by the Boards of Directors of both companies and is expected to close in the second half of the year. The acquisition is subject to Anadarko shareholder approval. It is also subject to regulatory approvals and other customary closing conditions.
Upon closing, the Company will continue be led by Michael Wirth as Chairman and CEO. Chevron will remain headquartered in San Ramon, California.
Credit Suisse Securities (USA) LLC is acting as financial advisor to Chevron. Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal advisor to Chevron. Evercore and Goldman Sachs & Co. LLC are acting as financial advisors to Anadarko. Wachtell, Lipton, Rosen & Katz and Vinson & Elkins LLP are acting as legal advisors to Anadarko.
Chevron will conduct a conference call on Friday, April 12, 2019, at 8:30 a.m. ET to discuss the transaction.
A webcast of the discussion will be available in a listen-only mode to individual investors, media, and other interested parties on Chevron’s website at www.chevron.com under the “Investors” section, or by calling Toll-Free U.S. +1 866-219-7734 or International +1 478-205-0666 and providing the Conference ID 2864506. Additional materials will be available under “Events and Presentations” in the “Investors” section on the Chevron website.
Chevron Corporation is one of the world’s leading integrated energy companies. Through its subsidiaries that conduct business worldwide, the company is involved in virtually every facet of the energy industry. Chevron explores for, produces and transports crude oil and natural gas; refines, markets and distributes transportation fuels and lubricants; manufactures and sells petrochemicals and additives; generates power; and develops and deploys technologies that enhance business value in every aspect of the company’s operations. Chevron is based in San Ramon, Calif. More information about Chevron is available at www.chevron.com.
Anadarko Petroleum Corporation’s mission is to deliver a competitive and sustainable rate of return to shareholders by exploring for, acquiring and developing oil and natural gas resources vital to the world’s health and welfare. As of year-end 2018, the company had 1.47 billion barrels-equivalent of proved reserves, making it one of the world’s largest independent exploration and production companies. For more information about Anadarko and APC Flash Feed updates, please visit www.anadarko.com.
As used in this news release, the term “Chevron” and such terms as “the company,” “the corporation,” “our,” “we,” “us” and “its” may refer to Chevron Corporation, one or more of its consolidated subsidiaries, or to all of them taken as a whole. All of these terms are used for convenience only and are not intended as a precise description of any of the separate companies, each of which manages its own affairs.
Decade Behind Bars For Permian Pipeline Protesters?
Artificial Intelligence Will Make Oilfield Pipeliners Obsolete
New Mexico to get $64 Billion, thanks to crude oil benefits
American debt-rating agencies go after Mexico’s Pemex
Trump’s foreign policy advisers on Iran? Blow up Iran’s oil industry…
Occidental Petroleum2 weeks ago
Moody’s likely to downgrade Oxy if it wins Anadarko
Drilling2 weeks ago
A Fracking slowdown in the Denver-Julesburg Basin?
Occidental Petroleum2 weeks ago
Largest oil producer in the Permian Basin?
OilField1 week ago
North Dakota will sue Washington over Bakken oil bill