Chevron-Anadarko Deal Drives Oil Patch M&A Speculation

Date : 04/12/2019 @ 6:57PM
Source : Dow Jones News

Chevron-Anadarko Deal Drives Oil Patch M&A Speculation

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By Francesca Fontana

 

Fellow oil and gas exploration and production stocks are trading higher as Chevron Corp.'s $33 billion cash-and-stock acquisition of Anadarko Petroleum Corp. leaves investors betting on more consolidation in the oil industry.

Chevron will pay $65 a share for Anadarko's, a 39% premium to its Thursday closing price. Chevron shares lost 4.6% to $120.19 a share, while Anadarko shares soared 33% to $62.30.

The deal is boosting stocks that analysts and investors think could be acquired next, said Welles Fitzpatrick of SunTrust Robinson Humphrey. Exploration and production companies Noble Energy Inc. and Devon Energy Corp. recently traded 9.4% and 7.5% higher, respectively.

While any shale company with scale, such as Devon, will likely be seen as a takeout target after this deal, Mr. Fitzpatrick said that Noble and Anadarko have incredibly similar assets, including a strong position in the Wattenberg basin in Colorado and longer-term offshore projects.

These companies could be attractive acquisition targets for Chevron competitors such as Exxon Mobil Corp. or Royal Dutch Shell, Raymond James analyst Muhammed Ghulam said, though previous deals haven't been fruitful.

"There's a historical pattern among large integrateds buying large-cap E&Ps that not all turn out as companies planned," Mr. Ghulam said, citing Exxon Mobil's 2010 purchase of E&P company XTO Energy Inc. as an example of an ill-timed deal. Exxon bought the company for more than $30 billion, but since has written down the value of its U.S. natural-gas assets, which include its XTO unit, by $2.5 billion.

The other question investors are asking is whether this deal could kick off a wave of mid-cap mergers.

"The other big theme of this deal is it showed that scale matters," Mr. Fitzpatrick said. "Chevron could have gotten similar assets for cheaper by (acquiring) mid-cap or smaller."

Analysts said they don't anticipate a competing bid after CNBC reported that Occidental Petroleum had already offered more than $70 a share in cash and stock for Anadarko and is now considering its options.

While the bid from Occidental, with a market cap about one-fifth of Chevron's, reportedly included more cash, Mr. Ghulam said Chevron's balance sheet inspires more confidence the deal would go through. Chevron's deal, unlike Occidental's, doesn't require a shareholder vote, he added. Occidental shares recently fell 2.8%.

 

Write to Francesca Fontana at francesca.fontana@wsj.com

 

(END) Dow Jones Newswires

April 12, 2019 13:42 ET (17:42 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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