BREAKING: Chevron moves to buy Anadarko in $33 billion stock and cash deal

Oil major Chevron has entered into a definitive agreement with Anadarko Petroleum Corporation to acquire all of the outstanding shares of Anadarko in a stock and cash transaction valued at $33 billion, or $65 per share.

Based on Chevron’s closing price on April 11, 2019 and under the terms of the agreement, Anadarko shareholders will receive 0.3869 shares of Chevron and $16.25 in cash for each Anadarko share. The total enterprise value of the transaction is $50 billion, Chevron said on Friday.

According to Chevron, the acquisition of Anadarko will significantly enhance Chevron’s  Upstream portfolio and further strengthen its positions in large, attractive shale, deepwater and natural gas resource basins.

Furthermore, Chevron noted that Western Midstream Partners, LP is a successful midstream company whose assets are well aligned with the combined companies’ upstream positions, which should further enhance their economics and execution capabilities.

“This transaction builds strength on strength for Chevron,” said Chevron’s 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 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,” Wirth concluded.

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

Walker added: “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.”

Anadarko strategic fit 

According to Chevron, benefits of acquiring Anadarko include the fact that Anadarko’s assets will enhance Chevron’s portfolio across a diverse set of asset classes, including: Shale & Tight, Deepwater, and LNG.

In the first category, the combination of the two companies will create a 75-mile-wide corridor across the most attractive acreage in the Delaware basin, extending Chevron’s position as a producer in the Permian.

In the Deepwater section, the combination will enhance Chevron’s existing high-margin position in the deepwater Gulf of Mexico(GOM) and extend its deepwater infrastructure network.

In the LNG category, Chevron will gain another world-class resource base in Mozambique to support growing LNG demand. Area 1 is a very cost-competitive and well-prepared greenfield project close to major markets, Chevron explained.

Other benefits of the deal for Chevron include the fact that the transaction is expected to achieve run-rate cost synergies of $1 billion before tax and capital spending reductions of $1 billion within a year of closing.

Chevron expects the transaction to be accretive to free cash flow and earnings per share one year after closing, at $60 Brent.

Chevron plans to divest $15 to $20 billion of assets between 2020 and 2022. The proceeds will be used to further reduce debt and return additional cash to shareholders.

As a result of higher expected free cash flow, Chevron plans to increase its share repurchase rate from $4 billion to $5 billion per year upon closing the transaction.

More to follow…

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