Chevron to buy Anadarko for $33B in shale, LNG push
new york — Chevron Corp on Friday said it will buy Anadarko Petroleum Corp for $33 billion in cash and stock to bolster its position in shale oil and the liquid natural gas (LNG) market with the biggest industry merger since Royal Dutch Shell bought BG Group in 2016.
With oil prices surging this year, Chevron and larger rival Exxon Mobil Corp have been increasing investment in the United States’ Permian basin in West Texas, the most prolific shale oil field in the country.
Chevron, Exxon, Royal Dutch Shell Plc and BP Plc largely missed out on the first phase of the Permian shale bonanza while more nimble independent producers such as Anadarko pioneered shale drilling technology and leased Permian acreage on the cheap.
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 Delaware basin, on the Texas-New Mexico border. Anadarko also has a Mozambique LNG project, part of one of the industry’s largest planned current investments.
The deal has sparked speculation that other shale producers are in play. Shares of Apache Corp, which also has extensive acreage in the Permian Basin, jumped 7 per cent in premarket trading, while Pioneer Natural Resources Co rose 6
per cent. Chevron shares fell 4 per cent as investors weighed the cost of the deal, which includes taking on $15 billion of Anadarko’s debt. “This seems a big bet on shale and on oil prices remaining high,” said CMC Markets analyst Michael Hewson. “That seems a big ask if you think that renewables are set to comprise an increasing bigger part of the energy mix.”
Shares of Anadarko surged 33 per cent, reflecting the 39 per cent premium offered by Chevron compared to Thursday’s closing market price. The $65 per share offer was structured as 75 per cent stock and 25 per cent cash.
Producers in the Permian basin pump around 4 million barrels per day (mbd) and IHS Markit expects it to hit 5.4 mbd in 2023, more than the total production of any OPEC country other than Saudi Arabia.