As the company stepped back from over-committing itself financially, this has left Occidental Petroleum (NYSE: OXY) as the winner of what might be one of the largest consolidations in recent oil industry history.
Occidental has extended a $56 billion bid in order to purchase Anadarko, a deal they officially won today as it won an agreement with the board. Chevron’s CEO Michael Wirth went on to say that “Winning in any environment doesn’t mean winning at any cost. Cost and capital discipline always matter, and we will not dilute our returns or erode value for our shareholders for the sake of doing a deal,” in light of the decision.
Instead of reacting negatively to the announcement, shares of Chevron have increased as markets saw the decision to back down from a bidding war as the financially smart thing to do. Analysts are already giving credit to Wirth for what’s seen as a good decision overall. Chevrons stock price increased 3.1 percent today in response to that announcement alone.
Earlier this week, Anadarko’s board of directors chose to back Occidental Petroleum’s bid to buy out the company after adding more cash to sweeten the deal. The company announced that they would terminate its merger agreement with Chevron.
While Anadarko’s board said on Thursday evening that it had signed an agreement with Occidental for a cash and share deal, fears that they might be overpaying for the acquisition ended up pushing Occidental’s share price to a ten-year low on Thursday evening, down 6 percent in today’s trading session. Shares of Anadarko fell around 3 percent as well.
Despite these fears, both parties remain confident that the massive $56 billion deal with go through. Occidental has already secured funding for the cash part of the offer, which is around 80 percent of the total deal in the first place. Additionally, Occidental doesn’t need to put the deal to a vote.
Some parties, however, have disapproved of the deal. T Row Price, which owns 3 percent of Occidental and the seventh-largest shareholder, went on to say that they would be voting to replace Occidentals board of directors in the future. Time will tell whether they will be successful or not.
Occidental Company Profile
Occidental Petroleum is an independent exploration and production company with operations in the United States, Latin America, and the Middle East. At the end of 2018, the company reported net proven reserves of 2.8 billion barrels of oil equivalent.
Net production averaged 658 thousand barrels of oil equivalent per day in 2018, at a ratio of 77% oil and natural gas liquids and 23% natural gas. – Warrior Trading News
Anadarko Company Profile
Anadarko Petroleum, based in The Woodlands, Texas, is one of the largest independent exploration and production companies in North America.
Its asset base includes conventional and unconventional properties in the U.S. and deepwater oil and gas projects in the Gulf of Mexico and Africa. At the end of 2018, proven reserves totaled 1.47 billion boe, with net production of 666 mboe/d. – Warrior Trading News