United States oil giants in $50bn mega-merger

Global Oil and Gas Production Outlook

Global Oil and Gas Production Outlook Rystad Energy

The acquisition of Anadarko could give Chevron a little more breathing room when crude prices do fall.

Oil prices have been on the rise as OPEC members cut production.

Chevron also touted Anadarko's liquefied natural gas production, as noted by Mizuho.

As of February 2018, Anadarko was the largest oil and gas producer in Weld County.

Following the transaction announcement, Anadarko's shares surged more than 30 percent in pre-market trade on the NYSE on Friday.

For Chevron, the second-biggest USA oil company after Exxon Mobil, the takeover of Anadarko marks its biggest deal since its purchase of Texaco, which closed in 2001. Exxon had average production previous year of 3.833 million. The oil giant also expects to streamline its portfolio by selling between $15 billion and $20 billion of assets.

It is the oil industry's largest deal since Royal Dutch Shell bought BG Group in 2016, and it sparked speculation that other shale producers are in play.

The combination will create 75-mile-wide corridor in the oil-rich Permian and add to Chevron's already significant natural gas holdings, which extend from its giant Gorgon field off the northwest coast of Australia to Africa and the United States.

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With the purchase of Anadarko, "we will now see Chevron emerging as the clear leader among all Permian players, both in terms of production growth and as a cost leader", predicts Per Magnus Nysveen, the head of research at Rystad Energy.

Chevron's deal values Anadarko at $65 per share, a 37% premium to its Thursday close.

-Chevron said the combined entity would have had daily output of 3.596 million barrels equivalent of oil a year ago, compared with Shell's 3.666 million.

Chevron is buying Anadarko to strengthen its position in US onshore shale plays, the Gulf of Mexico, and liquified natural gas (LNG).

Chevron will acquire all outstanding shares of Anadarko in a cash and stock deal for £25.2bn, or $65 per share (£49.71). Chevron will issue about 200 million shares and pay approximately US$8b in cash. Shell has in the past several months held talks with Endeavor Energy Resources LP, the largest privately-owned company in the Permian that bankers say might be valued at US$10 billion to US$15 billion.

-Chevron is increasing its annual stock buybacks to US$5 billion from US$1 billion. The company said will boost its share repurchase rate by US$1 billion to US$5 billion per year upon closing of the deal.

Anadarko also has a Mozambique LNG project, part of one of the industry's largest planned current investments, which Wirth said he still expects to move to final approval "sooner rather than later" this year.

"As our company has strengthened its financial situation over recent years, we're always looking to make our portfolio even stronger", Chevron chief executive Michael Wirth said in an interview on CNBC on Friday morning, where he announced the deal. However, it wasn't the only bidder, as Occidental Petroleum reportedly offered more than $70 a share - so it's possible there could still be a bidding war for Anadarko.

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