Plans of acquiring oil and gas exploration and production company Anadarko Petroleum was announced on Friday by Chevron in a $33 billion deal including cash and stock.
This deal would help in the expansion of the operations in shale oil and gas production, offshore drilling and liquefied natural gas exports for the second largest energy company in the U.S.
According to Refinitiv, this deal would be the 11th largest ever in the energy and power industry in the world.
“This takes a great company and makes it even better,” Chevron’s Chairman and CEO Michael Wirth told the media about the deal. “As our company has strengthened its financial situation over recent years, we’re always looking to make our portfolio even stronger,” he said.
Wirth believes that a “fair price” for Anadarko would be $65 per share. Chevron would be allowed to “win in any environment,” which would be supported by the by the strengths of the company in shale, deep water and natural gas, because of the deal. Savings of upto $1 billion in synergy would be created by the deal for Chevron, he said.
The deal would also grant Chevron a much expanded access to assets. This deal was announced as some of the largest oil companies such as Chevron and Exxon Mobil is attempting to create a dominant position for themselves in the Permian Basin which is the biggest shale field in the US and is also the major contributor in the recent oil production boom in the US.
In 2018, 16.2 billion barrels of oil equivalent (BOE) was hit by the Permian production of oil, natural gas and associated liquids for Chevron.
A 75 mile corridor across the Delaware basin portion of the Permian would be created for the new company after the deal, said both the companies. Oil producers can enhance efficiency in the advanced drilling methods that are required for production of shale oil and gas by the stringing together continuous acreage. This is at the core of the strategy of Chevron for the Permian field. Industrial scale to shale drilling is being brought about by the company and replacing the smaller independent companies engaged in extraction of shale oil.
Both the companies also have offshore operation in the Gulf of Mexico. Currently 10 offshore facilities in the Gulf is operated by Anadarko which would enable Chevron to increase its presence there, the company said.
According to Chevron, tie-backs to Anadarko assets in the Gulf is present because of the deal. This can be achieved through connecting offshore fields to existing infrastructure for example. Low-cost strategy of extraction of oil is being increasingly deployed by drillers to cut down on the huge costs of construction of deepwater platforms costing billions of dollars.
The African liquefied natural gas market would also be accessible to Chevron because of the deal. Mozambique has been identified by Anadarko for the development of amongst the largest LNG export facilities in the world and would use natural gas form the huge reserves present at the nearby offshore fields.
(Adapted from CNBC.com)