Why Chevron bought Anadarko

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Last week, Chevron sent waves to the oil industry by agreeing to buy Anadarko in the sixth largest market in the oil and gas sector.

Chevron & nbsp; agreed to pay $ 65 per share on Anadarko, which represented a premium of 39% over Anadarko's last closing price before the announcement of the transaction. & Nbsp; Chevron's spending will be $ 33 billion, plus Anadarko's $ 17 billion debt load for a total Chevron cost of $ 50 billion.

Anadarko has an extensive global portfolio, but the key to this deal lies in the promises of the Permian Basin, which is now the world& nbsp;high oil producer& nbsp;Region. This agreement has had several synergies that have made it particularly appealing to Chevron.

As Chevron points out, & & nbsp; the agreement & nbsp; connects many of its existing fields to create a 75-km-wide corridor in the Permian Basin. The connected area allows for longer sideways, allowing a producer to extract more oil from a well, reducing the cost per barrel.

Chevron was already one of the largest Permian license holders. The acquisition increases Chevron's 240,000 net acres to more than 1.4 million net acres in the Delaware Basin, where the shale oil economy is probably the best in the country.

Another synergy for Chevron is that they have not been a major player in the intermediate space, which involves the transportation and storage of oil and gas. This agreement gives Chevron a 55% interest in Western Midstream Partners, a $ 16 billion principal, exchange-traded limited partnership.

Western Midstream's badets are located in the Rocky Mountains, north-central Pennsylvania and Texas. The company is & nbsp; active in the collection, compression, treatment, processing and transportation of natural gas; collect, stabilize and transport condensate, natural gas liquids and crude oil; and the collection and disposal of produced water. Thus, Chevron immediately gets a large presence in the intermediate space.

The shareholders of Anadarko are undoubtedly satisfied with the immediate 30% increase in the price of their shares. However, a number of other operators in the Permian Basin have seen their prices rise as well, with a view to being an acquisition target.

In addition to Chevron, Occidental, Apache, ExxonMobil and Concho Resources are among the largest acreage holders in the Permian Basin. In fact, Occidental would have tried to acquire Anadarko before Chevron sealed the deal. But Occidental can now find himself in the sights of a larger player seeking to strengthen his Permian portfolio.

Other leading Permian producers include ConocoPhillips, EOG Resources, Pioneer Natural Resources, Noble Energy, Devon Energy and Diamondback Energy (which acquired its producer, Energen Corporation, in 2018). These companies could be targeted by supermajors or target smaller Permian producers, such as & nbsp; WPX Energy, Parsley Energy or Cimarex Energy.

Which companies could be on the Permian acquisition list? And who might be interested in acquisitions? I will compare and contrast those in the next article.

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Last week, Chevron rocked the oil industry by agreeing to buy Anadarko as part of the sixth largest oil and gas deal in history.

Chevron agreed to pay $ 65 per Anadarko share, which represents a premium of 39% over the last closing price of Anadarko before the announcement of the transaction. Chevron's expenses will rise to $ 33 billion, plus support for Anadarko's $ 17 billion debt, for a total cost of $ 50 billion for Chevron.

Anadarko has a large global portfolio, but the key to this agreement lies in the promise of the Permian Basin, which is now the world high oil producer Region. This agreement has had several synergies that have made it particularly appealing to Chevron.

As Chevron points out, this agreement links many of its existing fields to create a 75-km-wide corridor in the Permian Basin. The connected area allows for longer sideways, allowing a producer to extract more oil from a well, reducing the cost per barrel.

Chevron was already one of the largest Permian license holders. This acquisition increases Chevron's acreage from 240,000 net acres to over 1.4 million net acres in the Delaware Basin, where shale oil economies are probably the best in the country.

Another synergy for Chevron is that they have not been a major player in the intermediate space, which involves the transportation and storage of oil and gas. This agreement gives Chevron a 55% interest in Western Midstream Partners, a $ 16 billion principal, exchange-traded limited partnership.

Western Midstream's badets are located in the Rocky Mountains, north-central Pennsylvania and Texas. The company carries out natural gas collection, compression, treatment, processing and transportation activities; collect, stabilize and transport condensate, natural gas liquids and crude oil; and the collection and disposal of produced water. Thus, Chevron immediately gets a large presence in the intermediate space.

The shareholders of Anadarko are undoubtedly satisfied with the immediate 30% increase in the price of their shares. However, a number of other operators in the Permian Basin have seen their prices rise as well, with a view to being an acquisition target.

Beyond Chevron, Occidental, Apache, ExxonMobil and Concho Resources are the main holders of an area in the Permian Basin. In fact, Occidental would have tried to acquire Anadarko before Chevron sealed the deal. But Occidental can now find himself in the sights of a larger player seeking to strengthen his Permian portfolio.

ConocoPhillips, EOG Resources, Pioneer Natural Resources, Noble Energy, Devon Energy and Diamondback Energy (which acquired Energen Corporation in 2018) are among the other major producers of the Permian. These companies could be targeted by supermajors or target smaller Permian producers such as WPX Energy, Parsley Energy or Cimarex Energy.

Which companies could be on the Permian acquisition list? And who might be interested in acquisitions? I will compare and contrast those in the next article.