Chevron is buying Anadarko in a $50 billion oil megadeal

  • Anadarko Petroleum is being bought by Chevron Corporation in a $US33 billion megadeal, sending Anadarko’s shares up by 30%.
  • Chevron, the world’s third-largest energy company expects the deal to enhance its shale, deepwater, and natural gas operations.
  • Chevron expects to realise $US2 billion in synergies from the deal, but take on $US15 billion in debt.
  • It plans to divest between $US15 billion and $US20 billion of assets between 2020 and 2022, allowing it to slash debt and return cash to shareholders.
  • It will also leverage higher cash flow to bump up share repurchases from $US4 billion per year to $US5 billion.
  • Watch Chevron and Anadarko trade live.

Chevron and Anadarko Petroleum announced plans to join forces in a $US33 billion deal on Friday. The deal value climbs to $US50 billion, when including debt.

The world’s third-largest energy company expects to pay about $US8 billion in cash and the balance in shares for its smaller rival. Broken down, Anadarko shareholders will receive 0.3869 shares of Chevron and $US16.25 in cash for each Anadarko share they own.

It expects to realise $US2 billion in synergies from the deal, including $US1 billion in annual cost savings – raising the prospect of significant job cuts – and another $US1 billion from lower capital spending. However, it expects to assume roughly $US15 billion in debt from the deal.

Chevron, originally spun off from Standard Oil after antitrust officials broke up the energy behemoth in the early 1900s, plans to divest between $US15 billion and $US20 billion in assets between 2020 and 2022, and use the proceeds to slash its debt and return cash to shareholders. It also intends to capitalise on improved cash flow from the merger and bump up share repurchases from $US4 billion per year to $US5 billion once the deal closes.

Chevron predicts the merger will enhance its shale, deepwater and natural gas operations. It expects stronger positions in the Permian Basin in the southwestern US, the deepwater Gulf of Mexico, and its liquefied natural gas (LNG) base in Mozambique.

Anadarko investors cheered the deal, sending the oil-and-gas explorer and producer’s stock up 30% in pre-market trading to around $US61 – close to Chevron’s offer of $US65. Chevron shareholders seemed less thrilled – the company’s shares slid 5%.

The deal has been approved by the boards of both companies, who expect it to close in the second half of this year.

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