$33 bill deal in big oil: Chevron buying Anadarko Petroleum

$33 bill deal in big oil: Chevron buying Anadarko Petroleum

Chevron Corp agreed to buy Anadarko Petroleum Corp in a US$33 billion bet on the Permian shale-oil region and liquefied natural gas, intensifying a battle with Exxon Mobil Corp to be America's top energy company.

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. The oil and gas development company reported $0.38 earnings per share for the quarter, missing the Zacks' consensus estimate of $0.57 by ($0.19).

"Chevron now joins the ranks of the ultramajors", Roy Martin, an analyst at Wood Mackenzie Ltd., said in a note.

"We don't know where Oxy stock would be right now if they did make that deal", said Jeff Wyll, a senior energy analyst at Neuberger Berman Group LLC, which has $323 billion under management including Chevron and Anadarko shares.

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Chevron will remain headquartered in California and will continue to be led by Mr Wirth.

Furthermore, Chevron will be able to access Anadarko's pipeline and processing infrastructure in Texas and the Western US, and to their offshore facilities in the Gulf. Anadarko's shares soared in pre-market trading, while those of Chevron fell 5%. NY time on Friday and were down 5.3 percent to $119.35 at 3:45 p.m. Anadarko soared 32 percent. Small and mid-size companies played a dominant role in the whirlwind expansion of Permian production.

Chevron, which already has 2.3 million acres in the Permian Basin, said the deal to buy Anadarko would give the combined company a 75-mile (120-km)-wide corridor across the Permian's DE basin, on the Texas-New Mexico border.

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Anadarko employs about 1,100 people in Colorado, but has a much larger presence in Texas.

The deal is the biggest takeover in the oil and gas industry since Shell's $61-billion purchase of BG Group in 2015, according to data compiled by Bloomberg.

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

Also notable were gains by other midsized oil companies such as Devon Energy, EOG Resources and Marathon Oil amid speculation the takeover could spur other deals. The average premium in such transactions was 11 per cent past year and 22 per cent in 2017, according to data compiled by Bloomberg. Anadarko shares jumped 32 percent, reflecting the offer's 39 percent premium over Thursday's close.

That's still something of a bargain, investors said. We Are One Seven LLC bought a new position in shares of Anadarko Petroleum during the fourth quarter valued at about $41,000.

"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", Chevron's chairman and chief executive officer Michael Wirth said in a statement. At the same time, Chevron's stock was lower by more than 4 percent.

With around 1.5 billion barrels of proved reserves, Anadarko will significantly augment Chevron's already strong shale operations.

The last five years has seen the USA double its domestic oil production and become a rival to Saudi Arabia and Russian Federation as the world's premier supplier.

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