Chevron To Expand In Permian Basin, Acquiring Anadarko Petroleum For $33 Billion

Chevron To Expand In Permian Basin, Acquiring Anadarko Petroleum For $33 Billion

Chevron will also assume estimated net debt of $15 billion.

The combined Chevron and Anadarko businesses will make up one of the largest operators in the US shale basins at a time when America pumps out more crude oil than Saudi Arabia and Russian Federation, the Wall Street Journal reports.

Giant oil companies such as Chevon, Exxon Mobil, BP and Shell have been searching for new sources of hydrocarbons including natural gas, which introduce less carbon dioxide into the atmosphere.

The combined company will also control a 75-mile-wide corridor across the Delaware Basin, just beside the Permian Basin, a region bountiful with natural gas that has been exploited through shale drilling.

Chevron is paying $33 billion to acquire Anadarko Petroleum in a massive deal that will bolster its natural gas and shale operations.

Chevron also said it plans to divest $15 billion to $20 billion of assets between 2020 and 2022.

The deal has been approved by both companies' board of directors and remains subject to approval by Anadarko shareholders and customary closing conditions. Expenses from that project are expected to reach $4 billion over several years. The enterprise value of the deal is $50 billion.

Chevron said the combined entity would have had daily output of 3.596 million barrels equivalent of oil past year, compared with Shell's 3.666 million.

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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.

Societe Generale cut shares of Anadarko Petroleum (NYSE:APC) from a buy rating to a hold rating in a report published on Friday morning, The Fly reports.

"It will be a continuous shift toward larger companies in basically all segments of the shale industry", said Artem Abramov, head of shale research for Rystad Energy.

Shares of Anadarko surged 33 per cent, reflecting the 39 per cent premium offered by Chevron compared to Thursday's closing market price. Finally, Mitsubishi UFJ Financial Group reduced their price objective on Anadarko Petroleum to $70.00 in a research note on Thursday, February 7th.

The Anadarko deal was negotiated over the last few weeks, though Chevron has been thinking about the deal for some time, Wirth, a chemical engineer by training, said. "Executing it well is important, so that will be our focus", said Wirth.

Anadarko shareholders will receive 0.38 shares of Chevron and $16.25 (£12.43) in cash for each of their shares. The average premium in such transactions was 11 percent previous year and 22 percent in 2017, data compiled by Bloomberg showed. The Houston-based company's willingness to ink a sale, rather than capitalize on oil prices rebounding, illustrates the significant challenges facing many USA shale producers.

In aggregate, upon closing of the transaction, Chevron will issue approximately 200 million shares of stock and pay approximately $8 billion in cash.

In particular, Zacks Rank #3 (Hold) Chevron will look to utilize the tie-backs (or existing infrastructures) to Anadarko assets in the Gulf, thereby significantly lowering costs without the requirement to shell out billions in additional capital expenditures. Credit Suisse Group lowered their price target on shares of Anadarko Petroleum from $73.00 to $67.00 and set an "outperform" rating for the company in a research report on Wednesday, February 6th. Evercore Inc. and Goldman Sachs Group Inc. advised Anadarko alongside law firms Wachtell, Lipton, Rosen & Katz and Vinson & Elkins.