Chevron-Anadarko Deal Drives Oil Patch M&A Speculation
April 12 2019 - 1:57PM
Dow Jones News
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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