Tuesday 23 April 2019

Chevron leaps to 'ultramajor' oil status with deal

Exploration

The deal is the biggest takeover in the oil and gas industry since Shell's £47bn purchase of BG Group in 2015, according to Bloomberg data. Stock Image
The deal is the biggest takeover in the oil and gas industry since Shell's £47bn purchase of BG Group in 2015, according to Bloomberg data. Stock Image

Javier Blas, Kelly Gilblom and Simon Casey

Chevron has agreed to buy Anadarko Petroleum in a $33bn (€29.1bn) deal that adds US shale oil and African liquefied natural gas and puts it in the top ranks of the world's largest energy companies.

The takeover, the industry's sixth-largest, puts Chevron neck-and-neck with the oil and gas production of Exxon Mobil and Royal Dutch Shell, both of which have dominated Big Oil over the past decade.

Measured by cash flow, Chevron said it would have generated a combined $36.5bn with Anadarko last year, slightly ahead of Exxon's $36bn.

"Chevron now joins the ranks of the ultra majors," Roy Martin, an analyst at Wood Mackenzie, said in a note. The $65 per-share stock-and-cash deal sees Chevron doubling down on its expansion into the fast-expanding Permian Basin of West Texas and New Mexico, while also increasing its exposure to liquefied natural gas with Anadarko's project in Mozambique.

The new company will sell $15bn to $20bn of assets from 2020 to 2022 to reduce debt and return cash to investors. Chevron shares fell on the deal, dropping as much as 5.4pc in New York on Friday. Anadarko rose as much as 35pc to $63.23.

CNBC reported that Occidental Petroleum had bid more than $70 a share for Anadarko, citing unidentified people, and is now considering its options. The transaction is the biggest strategic move yet for Michael Wirth, the 58-year-old chemical engineer who became Chevron's chief executive officer just 14 months ago.

He has quickly shaken up the company by announcing an aggressive expansion plan for the Permian. "We will now see Chevron emerging as the clear leader among all Permian players, both in terms of production growth and as a cost leader," said Per Magnus Nysveen, head of research at consultant Rystad Energy AS in Oslo.

Anadarko, based in The Woodlands, Texas, has long been speculated about as a takeover target for the world's big oil companies, offering a suite of assets including its massive LNG development in Mozambique that's racing against an Exxon project to be the first operating in the country.

The deal is the biggest takeover in the oil and gas industry since Shell's £47bn purchase of BG Group in 2015, according to Bloomberg data.

Widening the measure to include chemicals and state-owned companies, both would be eclipsed by Saudi Aramco's $69bn acquisition of a majority stake in local petrochemical company Sabic this year.

The premium is high compared with most other acquisitions of oil companies valued at more than $1bn. The average premium in such transactions was 11pc last year and 22pc in 2017, according to data.

Bloomberg

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