USA oil giants in $50bn mega-merger

Oil & Gas Exploration ETFs Surge on Chevron Anadarko Deal

Equity ETF Channel Oil & Gas Exploration ETFs Surge on Chevron Anadarko Deal By Max Chen

Anadarko Petroleum Corporation engages in the exploration, development, production, and marketing of oil and gas properties.

Anadarko stock traded at about $77 a share less than a year ago. Chevron shares were down 4.2% from Thursday's close of $125.99 a share.

-Chevron will acquire all outstanding Anadarko shares for US$65 each, paying a mixture of cash and stock.

-Investors will receive 0.3869 shares of Chevron and US$16.25 in cash for each Anadarko share.

Chevron, which already has 2.3mn acres in the Permian Basin, said the Anadarko deal would give the combined company a 75-mile (120-km)-wide corridor across the Permian's DE basin, on the Texas-New Mexico border. In fact, it would the 11th biggest deal in the history of the sector. Cobiz Wealth LLC now owns 65,397 shares of the oil and gas development company's stock valued at $3,061,000 after purchasing an additional 9,646 shares in the last quarter.

Chevron chief executive Mike Wirth said the deal "builds strength on strength for Chevron". The enterprise value of the deal is $50 billion. Chevron is "getting good assets at a fairly reasonable price".

While the combined company will remain far behind Exxon Mobil Corp. and Royal Dutch Shell market capitalization, it jumps from the fourth biggest producer among major drillers, to second, according to Wood Mackenzie.

Anadarko has been one of the pioneers of the shale revolution, which turned the United States into the world's biggest oil producer, overtaking Russian Federation and Saudi Arabia.

Industry analysts say the new company will complement each partner, as Anadarko's assets will enhance Chevron's portfolio across a diverse set of asset classes in shale oil production, deep-water production, LNG, crude oil and gas production. "This is really about creating shareholder value", Wirth said in an interview. The Houston-based company's willingness to ink a sale, rather than capitalize on oil prices rebounding, illustrates the significant challenges facing many U.S. shale producers.

He added: "We have written extensively about our caution on Chevron relative to peers, noting that we thought its growth options outside of the Permian were weaker than peers". The company is bringing industrial scale to shale drilling, once the domain of small, independent wildcatters. Anadarko now operates 10 facilities in the Gulf.

Expanding Shale Operations Further: Anadarko is the biggest upstream player in Colorado's DJ Basin and has attractive assets in the Delaware Basin in Texas. Drillers have increasingly turned to the low-priced strategy to avoid the massive expense of building multibillion dollar deepwater platforms. They're going to need a lot more natural gas.

Occidental Petroleum Corp had made a US$70 per share bid for Anadarko and it is now weighing whether to move forward with a counter offer, a person familiar with the matter said.

The deal is seen closing in the second half of the year, subject to Anadarko shareholder and regulatory approvals. Chevron said the deal would produce $2 billion in annual cost savings within a year of closing.

Under the new arrangement, Chevron plans to divest $15 to $20 billion of assets between 2020 and 2022.

"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. Credit Suisse Group reissued a "buy" rating and set a $73.00 price objective on shares of Anadarko Petroleum in a research report on Wednesday, December 19th.

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