Chevron vaults into new league on $33B Anadarko acquisition


This gives Chevron a bigger presence in shale oil as well as deep water exploration in the Gulf of Mexico.

HRT Financial LLC purchased a new stake in shares of Anadarko Petroleum Co. Chevron shares were down 4.2% from Thursday's close of $125.99 a share. Shares went as $65 each.

Anadarko shareholders will receive 0.3869 shares of Chevron and $16.25 in cash for each share they own, or $65 per share.

Chevron Chief Executive Officer Mike Wirth said the deal offers a "compelling and unique fit" because the companies operate in similar areas, both with holdings in shale, offshore, and LNG projects.

BofA Merrill's Doug Leggate thinks "the upside from synergies, significant asset sales and de-risking of several aspects of APC's mix such as LNG development will transfer much of the remaining value uplift" to CVX; the firm upgraded CVX to Buy from Neutral with a $140 price target.

As oil companies have become more efficient at producing shale oil, which has changed the worldwide equation by making USA oil a rival against the cheap oil produced by Organization of the Petroleum Exporting Countries. It also plans to sell assets worth up to $20 billion between 2020 and 2022, the company said.

Chevron will have greatly expanded access to assets as a result of the combination. When the acquisition is approved sometime in the second half of 219, the Chevron steps one place higher and becomes the second largest oil-and-gas company of the United States of America after ExxonMobil.

"They take their Permian position up a further level".

Texas-based Anadarko is mainly focused on exploration and production of crude oil and natural gas.

"If you have large acreage positions like Pioneer and Concho, or lesser but more contiguous positions like Parsley Energy, and you're a pure-play Permian producer, there's no doubt that you are on the radar screen for these majors", said Rob Thummel, portfolio manager at Tortoise Capital Advisors.

Chevron, Exxon, Royal Dutch Shell Plc and BP Plc largely missed out on the first phase of the Permian shale bonanza while more nimble independent producers such as Anadarko pioneered shale drilling technology and leased Permian acreage on the cheap. That is at the heart of Chevron's Permian strategy.

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. Anadarko Petroleum had a net margin of 4.60% and a return on equity of 10.14%. Drillers have increasingly turned to the low-priced strategy to avoid the massive expense of building multibillion dollar deepwater platforms. With around 1.5 billion barrels of proved reserves, Anadarko will significantly augment Chevron's already strong shale operations. Occidental was the rival bidder that lost out to Chevron in the race to buy Anadarko, sources said on Friday.

The deal, which is subject to shareholder and regulatory approval, is expected to close in the second half of 2019. Chevron said the deal would produce $2 billion in annual cost savings within a year of closing.

At $33 billion, Chevron's acquisition of Anadarko Petroleum is something of a bargain, according to investors. Credit Suisse Group reaffirmed a "buy" rating and issued a $73.00 target price on shares of Anadarko Petroleum in a report on Wednesday, December 19th.