Chevron, which already has 2.3 million acres in the Permian Basin, said the deal to buy Anadarko would give the combined company a 75-mile (120-km)-wide corridor across the Permian's DE basin, on the Texas-New Mexico border.
Booming production in that region, powered by a revolution in technology that opened access to shale and other difficult-to-access formations, has turned the USA into an oil-exporting nation.
Occidental Petroleum Corp. had made a US$70-per-share bid for Anadarko and it's now weighing whether to move forward with a counter offer, according to a person familiar with the matter.
Chevron shares fell 4.9 percent to $119.76 on Friday.
Chevron (stock ticker: CVX, $CVX) Chairman and CEO Michael Wirth went on the morning cable business shows and hosted a conference call today, saying his company's acquisition of Anadarko Petroleum (stock ticker: APC, $APC) is "the highest return investment dollar that we can spend". The combined company will also control a 75-mile-wide corridor across the Delaware Basin, just beside the Permian Basin, a region bountiful with natural gas that has been exploited through shale drilling.
The merger would be the sixth largest in the industry and the biggest since Shell bought BG Group for £47...
NY time on Friday and were down 5.3 percent to $119.35 at 3:45 p.m. Anadarko soared 32 percent.
In oil and gas production terms, the deal puts Chevron neck-and-neck again with Royal Dutch Shell Plc for the title of the second-largest integrated major oil company, slightly behind Exxon.More news: Pistons get final ticket to playoffs
More news: Juventus made to wait for Serie A title after surprise defeat
More news: Wells Fargo's 1Q profits rise 14%, beating analyst forecasts
"Consolidation in deep water and the shales makes complete industrial sense", said Christyan Malek, the head of EMEA oil and gas research at JPMorgan Chase & Co.
The deal announced Friday comes with US crude prices up 40% this year and vaults Chevron into a new league. That's a premium of 39% to the closing price on Thursday.
The last five years has seen the US double its domestic oil production and become a rival to Saudi Arabia and Russian Federation as the world's premier supplier.
-Chevron will issue 200 million shares and pay US$8 billion in cash. The enterprise value of the deal is $50 billion. Oil executives and bankers had in the past speculated that Shell may buy Anadarko, because they have adjacent acreage.
Anadarko shareholders will receive 0.3869 shares of Chevron and $16.25 in cash for each share they own, or $65 per share. Harris Associates L P now owns 13,514,955 shares of the oil and gas development company's stock worth $592,496,000 after acquiring an additional 4,500,125 shares in the last quarter.
The company plans to add rigs for the Anadarko acreage, but still estimated a US$1 billion reduction of the combined capital spending of the two companies because of economies of scale, he added.
"We expect the Anadarko acquisition to close during the second half of 2019". Credit Suisse Group cut their price objective on Anadarko Petroleum from $73.00 to $67.00 and set an "outperform" rating for the company in a report on Wednesday, February 6th. Evercore Inc. and Goldman Sachs Group Inc. advised Anadarko alongside law firms Wachtell, Lipton, Rosen & Katz and Vinson & Elkins LLP.