Washington: Chevron Corp on Friday said it will buy Anadarko Petroleum Corp for $33 billion in cash and stock as the company doubles down on its bet on U.S. shale oil and gas production, where the surge in output has made the United States the world’s largest energy producer.
With oil prices surging this year, Chevron and larger rival Exxon Mobil Corp have been increasing investment in the Permian basin in West Texas, the most prolific shale oil field in the country.
Their efforts coincide with a pullback by the smaller companies that revolutionized the industry through shale drilling, who have had to curtail spending due to investor dissatisfaction with weak returns. The deal is the oil industry’s largest since Royal Dutch Shell bought BG Group in 2016, and it sparked speculation that other shale producers are in play.
Shares of Apache Corp, which also has extensive acreage in the Permian Basin, jumped 7 percent in premarket trading, while Pioneer Natural Resources Co rose 6 percent. U.S. crude oil production now surpasses 12 million barrels a day (bpd), and the nation is the third-largest producer of liquefied natural gas (LNG), the super-cooled fuel that is seeing record demand as a cheaper, cleaner alternative for countries that still rely heavily on coal for power generation.
Chevron, which already has 2.3 million acres in the Permian Basin, said the deal to buy Anadarko would give the combined company a 75-mile (120-km)-wide corridor across the Permian’s Delaware basin, on the Texas-New Mexico border. Anadarko also has a Mozambique LNG project, part of one of the industry’s largest planned current investments.
At the end of 2018, Exxon and Chevron accounted for about one-fifth of Permian output, where producers pump around 4 million barrels per day (bpd) currently. IHS Markit expects it to hit 5.4 million bpd in 2023, more than the total production of any OPEC country other than Saudi Arabia.
“It will be a continuous shift toward larger companies in basically all segments of the shale industry,” said Artem Abramov, head of shale research for Rystad Energy.
Chevron shares fell 4 percent as investors weighed the cost of the deal, which includes taking on $15 billion of Anadarko’s debt. Shares of Anadarko surged 33 percent, reflecting the 39 percent premium offered by Chevron compared to Thursday’s closing market price. The $65 per share offer was structured as 75 percent stock and 25 percent cash.