Chevron will buy Anadarko Petroleum for $US33 billion ($A46 billion) in a cash-and-stock deal as the company seeks to grow stronger in deep water exploration in the gulf and the energy-rich southwest region of Texas called the Permian Basin.
The deal arrives with US crude prices up 40 per cent this year. The companies put the enterprise value of the deal at $US50 billion (A70 billion).
“This transaction builds strength on strength for Chevron,” said 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 deep water Gulf of Mexico capabilities and will grow our LNG business.”
The LNG Wirth referred to is liquefied natural gas.
With the deal announced, it gets access to Anadarko’s LNG operations in Mozambique.
The combined company will also control a 120-kilometre-wide corridor across the Delaware Basin, just beside the Permian Basin, a region bountiful with natural gas that has been exploited through shale drilling.
There has been some pressure in energy markets as OPEC tries to push prices higher through production cuts.
When the organisation of oil-producing states released its monthly report this week, it revealed that energy output from OPEC had declined to levels not seen since early 2015.
That is largely being driven by the energy powerhouse Saudi Arabia, which last month removed another 324,000 barrels of oil per day from the market. Still, US crude was selling for less than $US65 ($A90) per barrel on Friday. That’s far from levels well above $US100 ($A140) per barrel reached just before the economic downturn in 2008, and there are signals that global economic growth is slowing. The acquisition of Anadarko could give Chevron a little more breathing room when crude prices do fall.
With savings the companies plan to book and rising cash flow, Chevron said Friday that it will bump up annual stock buybacks to $US5 billion ($A7 million), from $US4 billion ($A6 billion) a year, once the transaction is complete.
Chevron plans to divest $US15 billion ($A21 billion) to $US20 billion ($A28 billion) of assets between 2020 and 2022, with proceeds being used to lower debt and to return additional cash to shareholders, the company said.
Anadarko shareholders will receive 0.3869 shares of Chevron and $US16.25 ($A22.75) in cash for each share they own, or $US65 ($A91) per share.
Chevron will issue about 200 million shares and pay approximately $US8 billion ($A11 billion) in cash. It will also assume about $US15 billion ($A21 million) in debt.
Chevron Corp. will keep its headquarters in San Ramon, California. Anadarko Petroleum Corp. is based in The Woodlands, Texas.
The deal is expected to close in the second half of the year.
It still needs approval from Anadarko Petroleum Corp. shareholders and regulators.
Shares of Anadarko jumped 30.3 per cent before the market opened, while Chevron’s stock fell 3.2 per cent.