"Chevron now joins the ranks of the "ultra majors" - and the big three becomes the big four", said Roy Martin, senior analyst at consultants Wood Mackenzie.
In another big transaction, Chevron in 2005 bought Unocal for US$18.3 billion after raising the price during a high-profile bidding war with China's CNOOC that drew interest from lawmakers in Washington.
Details show the acquisition is structured as 75 percent stock and 25 percent cash, providing an overall value of $65 per share based on the closing price of Chevron stock on April 11, 2019. The new company will sell US$15 billion to US$20 billion of assets from 2020 to 2022, to reduce debt and return cash to investors.
Chevron Corp. will keep its headquarters in San Ramon, California.
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Wirth, 58, took over as chief executive 14 months ago, with a reputation for keen attention to costs earned from running Chevron's pipeline and trading units, and almost a decade in charge of its refining business. Small and mid-size companies played a dominant role in the whirlwind expansion of Permian production.
Anadarko employs about 1,100 people in Colorado, but has a much larger presence in Texas.
As oil companies have become more efficient at producing shale oil, which has changed the global equation by making USA oil a rival against the cheap oil produced by Organization of the Petroleum Exporting Countries. The average premium in such transactions was 11 per cent a year ago and 22 per cent in 2017, according to data compiled by Bloomberg. That's a premium of 39 per cent to the closing price on Thursday and Anadarko's shares soared in pre-market trading.
That's still something of a bargain, investors said. Claybrook Capital LLC purchased a new stake in Anadarko Petroleum in the 4th quarter valued at about $29,000.
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Chevron will have greatly expanded access to assets as a result of the combination.
In 2018, Chevron had US$42.4 billion in revenues and pumped 3.1 million barrels of oil equivalent per day, above the level of most members of the Organization of the Petroleum Exporting Countries. Measured by cash flow, Chevron said in a statement it would have generated a combined US$36.5 billion with Anadarko previous year, slightly ahead of Exxon's US$36 billion.
Chevron's acquisition of Anadarko is meant to enhance its Upstream portfolio and further improve on its already leading positions in large, attractive shale, deepwater and natural gas resource basins, the companies said. "It gives the combined entity the ability to high-grade its assets and focus on where the best cash returns are". At the same time, Chevron's stock was lower by more than 4 percent.
Last month, Chevron said it expects shale production from the basin to reach 600,000 barrels per day (bpd) by the end of next year. The average premium in such transactions was 11 percent previous year and 22 percent in 2017, data compiled by Bloomberg showed.
Investors would receive 0.3869 of a share of Chevron and $16.25 in cash for each Anadarko share. The cash component of the deal is worth about $8 billion, while the equity contribution will be obtained through the issuance of approximately 200 million in Chevron shares. Chevron will also assume estimated net debt of $15 billion. Finally, Mizuho reissued a buy rating and issued a $55.00 price objective on shares of Anadarko Petroleum in a research report on Tuesday, February 12th. As a group, sell-side analysts anticipate that Anadarko Petroleum Co. will post 1.66 EPS for the current year. Chevon earned almost $15 billion in 2018 on $166 billion in sales.
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The deal has been approved by both companies' boards and is expected to be finalized later this year. Evercore Inc. and Goldman Sachs Group Inc advised Anadarko alongside law firms Wachtell, Lipton, Rosen & Katz and Vinson & Elkins LLP. Occidental was the rival bidder that lost out to Chevron in the race to buy Anadarko, sources said on Friday.