Chevron to acquire rival US oil and gas company Anadarko for $33bn

Chevron acquisition of Anadarko : California-based Chevron has agreed to acquire rival US oil and gas company Anadarko Petroleum in a stock-cum-cash deal worth $33 billion, as per the latest energy acquisition news.

Chevron acquisition of Anadarko

As per the terms of the deal, shareholders of the Texas-based Anadarko Petroleum will exchange their shares in the company with 0.3869 shares of Chevron plus $16.25 in cash.

The total enterprise value of the deal is $50 billion, which includes the assumption of net debt of Anadarko Petroleum’s $15 billion and book value of the non-controlling stake.

According to Chevron, the acquisition of Anadarko Petroleum will enhance its upstream portfolio by a significant extent and further consolidate its positions in large, attractive shale, deepwater and natural gas resource basins.

The Californian oil and gas giant further said that the assets of Western Midstream Partners – a Delaware master limited partnership formed by Anadarko Petroleum, are well aligned with the enlarged company’s upstream positions. This will further improve the economics and execution capabilities of the enlarged company formed through the merger between Chevron and Anadarko Petroleum.

Anadarko Petroleum headquarters in The Woodlands, Texas. Photo courtesy of Philcomanforterie/Wikipedia.org.

In the shale and tight gas business, the merger of the two companies will create a 121km-wide corridor in the Delaware basin, which is expected to extend Chevron’s position as a Permian Basin producer.

In deepwater operations, the merger is expected to improve the existing high-margin position of Chevron in the deepwater Gulf of Mexico (GOM) besides extending its deepwater infrastructure network.

As far as LNG production is concerned, Chevron following the merger will get access to another world-class resource base located in Mozambique to support growing demand for the commodity. Chevron said that Area 1 is a very cost-competitive and well-prepared greenfield project located close to important markets.

The enlarged company will operate from the existing Chevron’s headquarters in San Ramon in California.

Commenting on Chevron acquisition of Anadarko, Michael Wirth – Chevron Chairman and CEO, said: “This transaction builds strength on strength for Chevron.

“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.”

Chevron acquisition of Anadarko is expected to result in $1 billion of run-rate cost synergies before tax and capital spending reductions of a similar amount within a year of completion of the merger.

Chevron revealed its intentions to sell $15-$20 billion of assets between 2020 and 2022 and use the proceeds to further cut down debt and return additional cash to shareholders.

Al Walker – Chairman and CEO of Anadarko Petroleum, commenting on Chevron acquisition of Anadarko, said: “The strategic combination of Chevron and Anadarko will form a stronger and better company with world-class assets, people and opportunities.

“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.”

The closing of Chevron acquisition of Anadarko, which is subject to Anadarko Petroleum’s shareholder approval, regulatory approvals, and other customary closing conditions, is expected to take place in the second half of 2019.