USA oil giants in $50bn mega-merger

Chevron buying Anadarko for $33 billion as crude prices rise

Oil major Chevron Corp's $33 billion deal on Friday to acquire Anadarko Petroleum Corp has some investors and industry executives asking whether it is time for other United States shale oil and gas producers to consider selling themselves.

The energy firm said the addition of Anadarko's portfolio, which primarily focusses on the Gulf of Mexico and onshore shale in the USA, will "significantly enhance" its own.

Anadarko, which is based in The Woodlands, Texas, has always been rumored as a takeover target for the world's largest oil companies, offering a suite of assets including a massive LNG facility in Mozambique that's racing against Exxon's project to be the first operating in the country.

Boosts LNG Output: The Anadarko acquisition also gives Chevron greater exposure to the African LNG market through the former's $20 billion project in northern Mozambique.

Chevron, valued at $227 billion, is America's second largest oil company, behind the $343 billion Exxon.

The company plans to add rigs for the Anadarko acreage, but still estimated a US$1 billion reduction of the combined capital spending of the two companies because of economies of scale, he added. The average premium in such transactions was 11 per cent past year and 22 per cent in 2017, according to data compiled by Bloomberg.

Anadarko shareholders will receive 0.3869 shares of Chevron and $16.25 in cash for each share they own, or $65 per share. Shell also will feel pressure to buy more acreage in the prolific stretch of West Texas and New Mexico, possibly by acquiring smaller players like WPX Energy and Cimarex Energy, Portillo said.

Pioneer Natural Resources (NYSE:), Parsley Energy (NYSE:) and Concho Resources (NYSE:), major Permian shale companies, rallied on news of the deal.

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"I don't necessarily feel like they overpaid even with the premium embedded in the deal", said Noah Barrett, who helps manage $328 billion at Janus Capital Management in Denver.

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 average premium in such transactions was 11 percent past year and 22 percent in 2017, data compiled by Bloomberg showed.

Head of research, Per Magnus Nysveen said: "We think the deal value price of $50 bn is surprisingly good for Chevron, as our base case valuation of Anadarko is $65 bn".

We Are One Seven LLC bought a new position in shares of Anadarko Petroleum during the fourth quarter valued at about $41,000.

-Chevron will issue 200 million shares and pay US$8 billion in cash. Millennium Management LLC now owns 5,295,821 shares of the oil and gas development company's stock worth $232,169,000 after acquiring an additional 4,975,016 shares in the last quarter. The combined company's cash flow previous year, US$36.5 billion, would have exceeded Exxon's.

"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", he added.

"We expect the Anadarko acquisition to close during the second half of 2019". Finally, Credit Suisse Group lowered their price objective on shares of Anadarko Petroleum from $73.00 to $67.00 and set an "outperform" rating on the stock in a research report on Wednesday, February 6th. Anadarko was advised by Evercore and Goldman Sachs.

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