“Coming on the heels of a record low quarter for U.S. M&A activity of a paltry $1.6 billion, Chevron stepped up to the plate with a $50 billion deal to acquire Anadarko,” noted Drillinginfo M&A Analyst Andrew Dittmar.
The offer of $65/share (75% equity, 25% cash) represents a 37% premium to Anadarko’s prior-day close and the deal value of $50 billion consists of $33 billion is cash/stock plus $15 billion in net debt assumed plus $2 billion of book value on non-controlling interest.
“The deal appears to be well received by Wall Street, reversing a trend seen in Q4 2018 that showed buyer’s stock trade down significantly with deal announcements. Chevron is currently trading down a minor 5% on the news” added Dittmar.
The deal is the sixth largest deal in oil and gas history and the largest deal since Shell bought BG for $82 billion in 2015 to become a global LNG powerhouse.
“Clearly, a large driver of the deal is Anadarko’s prized position in the Delaware Basin where Chevron increases its position by 240,000 net acres to over 1,400,000 net acres. The Delaware Basin currently provides the best well economics of any shale play in the country” said Dittmar. Drillinginfo analysis indicates about $12 billion of the $50 billion purchase price is attributed to the Delaware Basin acreage or approximately $50,000 per acre. Chevron also acquires world class midstream assets that includes 12,509 miles of pipeline that tie to key US supply basins.
Delaware Basin Strategic Acreage Positions
Beyond the Permian, Chevron gets overlapping operations in Colorado’s DJ Basin and the deepwater Gulf of Mexico. In Africa, Chevron establishes new valuable positions in Mozambique, Algeria and Ghana that complement Chevron’s existing positions across Africa. The acquired Mozambique asset is a world class gas asset that is underway for full scale global LNG development.
“This blockbuster deal portends to jumpstart further consolidation within the Permian Basin and the US shales in general. As these shales become further de-risked and companies move to full development mode, scale matters. Drillinginfo expects this deal to be the start of further consolidation with the US shales and specifically within the Permian Basin” Dittmar concludes.