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A Surprise Megadeal: Chevron to Acquire Anadarko

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Chevron to acquire Anadarko

Chevron (CVX) has agreed to acquire energy company Anadarko Petroleum Corporation (APC). As per the agreement, Chevron will buy all the outstanding shares of Anadarko in a cash and equity deal. This acquisition is expected to enhance Chevron’s upstream portfolio and expand its midstream asset base. In pre-market trading, Anadarko stock surged by ~33%, while Chevron stock fell about 3%.

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What’s the deal?

Anadarko shareholders will receive 0.3869 shares of Chevron and $16.25 in cash per APC share. Chevron will issue around 200 million shares and pay about $8 billion in cash. In total, Anadarko shareholders will receive $65 per share (including the value of Chevron’s shares). Chevron’s stock price stood at $125.99 per share on April 11, 2019. So the transaction is valued at around $33 billion. The market caps of Chevron and Anadarko before the announcement of the acquisition deal stood at $239 billion and $23 billion, respectively.

Both companies’ boards of directors have approved the transaction. The acquisition process is expected to close in the second half of 2019, subject to requisite approvals.

Benefits of the acquisition

The acquisition is expected to enhance Chevron’s hydrocarbon production and reserves. Chevron’s production stood at 2.93 million barrels of oil equivalent per day (or MMboed) in 2018. However, if Anadarko had been part of Chevron, then the combined volumes would have stood at 3.60 MMboed. In comparison, ExxonMobil (XOM), Royal Dutch Shell (RDS.A), and BP’s (BP) production volumes stood at 3.83 MMboed, 3.67 MMboed, and 2.54 MMboed, respectively, in 2018.

If Chevron’s reserves included Anadarko’s reserves, then total reserves would have stood at 13.5 billion barrels of oil equivalent in 2018.

Also, the acquisition is anticipated to create synergies of around $2 billion on an annual run-rate basis. This figure includes operational synergies of $1 billion and another $1 billion of capex synergies.

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