Chevron Buys Anadarko Petroleum For US$33 Billion To Boost Shale Operations

Chevron Oil
Men in construction hats are seen aboard Chevron's Petronius oil platform in the Gulf of Mexico (Photo: Reuters)

A massive US$33 billion deal is reportedly now in the works as Chevron announced its plans to acquire Anadarko Petroleum through a cash and stock purchase. The California-based energy company claims that the deal should significantly boost its shale operations and its production of natural gas.

The price that Chevron is paying for the Anadarko Petroleum values the company stocks at around US$65 per share. The price is 39 percent higher than its current stock prices as of this week's trading. Unlike Chevron, Anadarko Petroleum does not have a lot of refineries or gas stations to speak of. Chevron currently has around eight operational refineries and close to 8,000 gas stations across the country.

What Anadarko Petroleum does have is a massive amount of proven reserves, estimated to be around 1.5 billion barrels spread throughout various locations. The company's significant holdings and its expertise in the exploration and production of crude and natural gas make it quite a valuable asset for any large energy firm.

Following the announcement of the planned acquisition, Chevron's CEO Michael Wirth mentioned to investors that purchasing Anadarko Petroleum will further solidify the company's position as a major share oil producer in the southern United States.

The acquisition would also apparently bolster the company's drilling operations in the Gulf of Mexico. Wirth also mentioned that acquiring Anadarko Petroleum would allow Chevron to tap into rich oil and gas fields, such as those in Mozambique.

Under the cash and stock deal, Chevron would be issuing 200 million new shares worth around US$8 billion to fund the acquisition. The company also revealed that it will assume Anadarko Petroleum's entire US$15 billion debt.

With the merger, Chevron estimates that it should be able to save around US$ 2 billion in the first year alone. The company also hopes to gain around US$20 billion in the next few years after it sells redundant assets acquired after the purchase.

Chevron will reportedly use the proceeds of the asset sales to further reduce Anadarko Petroleum's standing debts, with some of the money going towards shareholder returns.

The firm also plans to repurchase an additional US$1 billion of its own stocks from shareholders, which will be on top of the stocks it is already planning to buy back.

According to Chevron, it is already now in the process of ironing out the details of the deal, which it expects will be closed by the second half of the year. However, Chevron's proposal will still need to be approved by regulators and by Anadarko Petroleum's shareholders.

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