Editorial

Chevron buys Anadarko in US$50bn cash-and-stock deal

With Chevron’s cash-and-stock acquisition of Anadarko, the big three becomes the big four

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This is the biggest upstream deal since Shell and BG in 2015. Chevron now joins the ranks of the UltraMajors – and the big three becomes the big four.

Roy Martin

Senior Research Analyst, Corporate Analysis

For a deep insight into US upstream firms such as Devon and Encana, look to London-based analyst Roy.

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Once the deal closes, Chevron will be the second-largest producing major in 2019 terms. It was fourth.

The acquisition makes the Majors’ peer group much more polarised. ExxonMobil, Chevron, Shell and BP are now in a league of their own. The deal plays to Chevron’s strengths, which are tight oil and LNG. On top of this, it diversifies their growth options, while also giving them more in tight oil.

By buying Anadarko, they take on a highly contiguous Delaware basin position in the Permian. Chevron ought to be able to do more with the acreage than Anadarko, which lagged behind in terms of well productivity. Chevron’s deepwater Gulf of Mexico position is also strengthened.

We do not expect the deal to have any near-term impact on the Mozambique LNG project, as Anadarko has indicated that FID is imminent. However, Mozambique offers attractive long-term growth and diversification opportunities for Chevron's LNG portfolio.

Chevron has been noticeably absent in the midstream rush of the past couple of years. It now takes a 55% stake in Western Gas, which goes a long way toward fixing that. APC Western’s structure was simplified at the end of last year, giving Chevron a vehicle to spin assets down in the future if needed.

The deal will also see Chevron assert itself even more as the leader in low-royalty assets in the US Lower 48. Chevron should truly outperform on cash flow and payback metrics for tight oil.

Crude for Thought - Chevron Bulks Up With Plans To Acquire Anadarko

Roy Martin and Ben Shattuck discuss how the combined company becomes the king of the Permian and GoM.

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