12/ Apr’19

4 things to know about Chevron-Anadarko deal

Chevron acquiring Anadarko because of US shale?

Jon Hilsenrath of the Wall Street Journal discusses the Chevron-Anadarko deal and his outlook for bank earnings

Chevron announced Friday that it will buy Anadarko Petroleum for $33 billion in a cash-and-stock deal as the oil and gas giant revs up its battle with Exxon Mobil to be America’s top energy company.

The acquisition comes as U.S. crude prices have climbed more than 40 percent this year.

Here are four things to know about the deal.

Why is deal happening?

Chevron hasn’t been shy about seeking acquisitions. In a prior release, the company revealed it is looking to upgrade its portfolio and ‘potentially’ divest $15 billion to $20 billion in assets between 2020 and 2022.

Plus, the acquisition now puts Chevron neck-and-neck with its biggest competitors Exxon and Royal Dutch Shell Plc, the two biggest leaders in the sector. Adding Anadarko to its portfolio, makes Chevron the world’s third-largest oil producer.

Why Anadarko?

While Anadarko has long been targeted a possible takeover target due to its wide-range of assets, including its liquefied natural gas (LNG) facility in Mozambique that big oil giants, especially Exxon, have been racing to become the first operator in, it has a host of other benefits for Chevron.

In a statement Chevron CEO Michael Wirth said 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.”

Growing Chevron’s LNG business comes at a critical time when natural gas is being viewed as more favorable fuel in the fight against climate change and gas emissions.

Additionally, it will help them built scale in the shale sector, in which both Chevron and Exxon Mobil are both relative newcomers.

The full cost

Chevron’s $33 billion acquisition is set to be valued at a total of about $48 billion with debt. Chevron offered $60.95 per share in stock and cash. In the deal, Chevron will assume $15 billion in debt as part of the deal, which will need to be approved by shareholders.

The deal is first big move for Chevron’s new CEO

The transaction is the biggest deal yet for Chevron’s new CEO Michael Wirth, who has been on the job for a little more than a year. Chevron’s former CEO John Watson retired from the company last February.

Since starting 15 months ago, Wirth has quickly shaken up things at the company. Last month, he made news when he announced his aggressive expansion plan in the Permian Basin, which will include 900,000 barrels of oil per day by the end of 2023.