Chevron deal makes it oil 'ultramajor'

Chevron deal makes it oil 'ultramajor'

Its wide range of assets from the Permian Basin to the Gulf of Mexico and Mozambique left investors exposed to a multitude of risks in the global oil market.

In 2018, Chevron had $42.4 billion in revenues and pumped 3.1 million barrels oil-equivalent per day, above the level of most members of the Organization of the Petroleum Exporting Countries.

The sale of Anadarko could likely change that for potential acquirers, including ConocoPhillips and Occidental Petroleum Corp, the two largest United States independents behind the majors. Chevron fell as much as 5.6 per cent.

The acquisition is composed of 75 per cent stock and 25 per cent cash, with Anadarko shareholders receiving 0.39 shares of Chevron and US$16.25 in cash for each Anadarko share held. The deal announced on Friday adds acreage and production in the prolific Permian shale basin of West Texas and southeast New Mexico and expands the company's presence in the Gulf of Mexico.

The energy sector rallied after Chevron announced a deal to buy Anadarko, with Anadarko shares surging 31.9% late Friday.

The acquisition launches Chevron to a brand new aggressive stage, establishing the San Ramon, California-based mostly firm as an extra formidable challenger to rival oil giants Exxon Mobil, Royal Dutch Shell, and BP, says vitality and mining analysis agency, Wooden Mackenzie.

"It creates attractive growth opportunities in areas that play to Chevron's operational strengths and underscores our commitment to short-cycle, higher-return investments".

"Consolidation in deep water and the shales makes complete industrial sense", said Christyan Malek, the head of EMEA oil and gas research at JPMorgan Chase & Co.

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Chevron chief executive Mike Wirth said the deal "builds strength on strength for Chevron". "It gives the combined entity the ability to high-grade its assets and focus on where the best cash returns are".

The deal may put pressure on Shell to seek assets in the Permian, where the Anglo-Dutch company has said it wants to grow.

Occidental Petroleum Corp. made a $70-per-share offer for Anadarko, according to a person familiar with the matter.

Anadarko submitted the second most applications for permits to begin drilling in Wyoming a year ago, but it trailed behind in actual production.

The total enterprise value of the transaction is $50 billion. Chevron will issue 200 million shares and pay US$8 billion in cash.

Chevron's takeover of one of the America's biggest independent oil and gas producers is the first major move towards consolidation since the global oil downturn as output from the USA shale industry continues to rise. DNB Asset Management AS now owns 2,215,902 shares of the oil and gas development company's stock valued at $100,779,000 after purchasing an additional 289,624 shares in the last quarter.

-It also expects run-rate cost synergies of US$1 billion before tax and capital spending cuts of US$1 billion. Credit Suisse Securities (USA) LLC is Chevron's financial adviser, while Paul, Weiss, Rifkind, Wharton & Garrison LLP is its legal adviser.

The deal has been approved by both companies' boards and is expected to be finalized later this year. Anadarko was advised by Evercore and Goldman Sachs.

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