London — Chevron has agreed to acquire independent Anadarko Petroleum in a $50 billion deal set to extend the US oil major's leading position in the prolific Permian shale basin and grow its deepwater and global LNG portfolio.
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Already approved by the boards of both companies, the deal would boost Chevron's 2018 production to 3.6 million b/d of oil equivalent, based on Anadarko's total oil and gas production volumes of 666,000 boe/d last year.
As a result, Chevron's output would rival Shell for the current number two spot in terms of production among the Western oil majors. Shell pumped an average of 3.67 million boe/d last year, below ExxonMobil's sector-leading 3.83 million boe/d.
Anadarko's year-end 2018 proved reserves stood at 1.47 billion boe, of which 63% was liquids and with approximately 78% developed.
"The acquisition of Anadarko will significantly enhance Chevron's already advantaged upstream portfolio," Chevron said in a statement. "It creates attractive growth opportunities in areas that play to Chevron's operational strengths and underscores our commitment to short-cycle, higher-return investments."
In the US, the acquisition will create "a 75-mile-wide corridor across the most attractive acreage in the Delaware basin," Chevron said, adding that this would grow its credentials as a leading US shale oil player.
Anadarko's onshore US assets in the Delaware, Denver and Wyoming basins produce the majority of its upstream volumes, which production averaging 457,000 boe/d in Q4 2018.
The deal will also boost Chevron's existing high-margin upstream assets in the deepwater Gulf of Mexico and provide a major new LNG project developing Mozambique's Area 1 gas block.
The deal will also create opportunities for assets sales to "high-grade" the upstream portfolio, Chevron said, flagging plans to divest $15-$20 billion of assets between 2020 and 2022. It said the proceeds will be used to further reduce debt and return additional cash to shareholders.
"The strategic combination of Chevron and Anadarko will form a stronger and better company with world-class assets, people and opportunities," Anadarko CEO and chairman Al Walker said in a statement.
Chevron said the deal is expected to provide a total $2 billion in annual operating cost and capital synergies when completed with run-rate synergies of $1 billion before tax and capital spending reductions of $1 billion within a year of closing.
The acquisition is structured as 75% stock and 25% cash deal, providing an overall value of $65 per share based on the closing price of Chevron's stock on April 11. Under the deal, Chevron said it will issue some 200 million new shares and pay approximately $8 billion in cash, for a total of $33 billion.
Chevron said the acquisition also assumes estimated net debt of $15 billion, bringing the total value to $50 billion, including the assumption of net debt and book value of non-controlling interest.
Expected to close in the second half of the year, the deal will be accretive to free cash flow and earnings one year after close, Chevron said. As a result of higher expected free cash flow from the enlarged company, Chevron raised its planned share repurchase rate from $4 billion to $5 billion per year from the close of the deal.