Enverus Blog

Insights across the energy value chain

Drillinginfo’s Market Intelligence and Market Research product lines have performed in-depth research regarding the valuation and strategic aspects regarding the battle between Chevron and Occidental for the prized Anadarko Petroleum (NYSE: APC). For more detailed information on these aspects, please visit a replay of Drillinginfo’s Webinar held on April 25, 2019, which can be found here:

Depending on the final outcome, the acquisition of Anadarko Petroleum will easily rank within the Top 10 all-time upstream oil and gas deals in history as measured in dollars of the day.

Recap

April 12, 2019, Friday morning

  • Chevron (NYSE: CVX) and Anadarko announce a definitive agreement executed on April 11, 2019 whereby Chevron would acquire Anadarko
  • Offer at announcement is $65/share (25% cash/75% equity) for Anadarko structured as $16.25/share cash and .3869 of Chevron stock.
  • Deal value of $50 billion consisting of $33 billion in equity and $17 billion of net Anadarko debt assumed.
  • Offer represents a 39% premium to Anadarko prior day stock price
  • Merger Agreement includes a $1 billion termination fee to be paid by Anadarko to Chevron. This equates to $2.04 per APC share based on its 1Q 2019 shares outstanding.
  • Anadarko closes Friday at $61.78/share – up 32%.

April 24, 2019, Wednesday morning

  • Occidental Petroleum (NYSE: OXY) announces a competing offer to buy Anadarko
  • Offer at announcement is $76/share (50% cash/50% equity) for Anadarko structured as $38.00/share cash and .6094 per share of Occidental stock.
  • Deal value of $57 billion consisting of $40 billion in equity and $17 billion of net Anadarko debt assumed.
  • Offers represents a 20% premium to Anadarko’s share price from the prior day ($63.99) and a 62% premium from Anadarko’s share price the day prior to the Chevron offer.
  • Anadarko closes Wednesday at $71.40/share – up 12%.

April 24, 2019, Wednesday

  • Chevron issues a statement – “We are confident the transaction agreed to by Chevron and Anadarko will be completed.

April 29, 2019, Monday morning

  • Anadarko announces intention to resume negotiations with Occidental.
  • Anadarko’s Board of Directors unanimously determined that the Occidental proposal could reasonably be expected to result in a “Superior Proposal” as defined in the Chevron Merger agreement.
  • Chevron issues a statement – “We believe our signed agreement with Anadarko provides the best value and most certainty to Anadarko’s shareholders.

April 30, 2019, Tuesday morning

  • Following reports by Bloomberg of an Oxy jet being in Omaha on Sunday, the dots connect with an official announcement that Warren Buffett’s Berkshire Hathaway commits to a $10 billion preferred equity investment (8% yield plus 80 million warrants to buy Oxy at $62.50/share) contingent on Oxy completing a deal with Anadarko.

While rare, a battle for the acquisition of a large, recognized E&P company is not without precedent. Certainly, within the U.S., the most famous battle began in late 1983 when Pennzoil made an informal but binding contract to acquire Getty Oil in a complex structure that valued Getty at $112.50/share. On January 6, 1984, Texaco announced an offer and Getty agreed to sell at $125/share. The battle famously resulted in a long legal dispute whereby Pennzoil (represented by attorney Joe Jamail) accepted a $3 billion settlement after Texaco filed Ch 11 bankruptcy.

The Scorecard of Offers for Anadarko (per APC share)

Company Date Price Cash Stock Cash/Equity
Chevron Offer  April 12, 2019 $65.00 $16.25 0.3869 CVX share 25%/75%
Occidental Offer  April 24, 2019 $76.00 $38.00 0.6094 OXY share 50%/50%
Occidental Offer  May 5, 2019 $76.00 $59.00 0.2934 OXY share 78%/22%

The Horserace: Implied Offer Values per APC Share and APC Share Price (as of Market Close)

  April 24 April 25 April 26 April 29 April 30 May 1 May 2
Chevron Offer $62.00 $61.87 $61.56 $61.79 $62.70 $61.83 $61.28
Occidental Offer $75.78 $75.69 $75.36 $74.62 $73.88 $73.03 $72.95
Anadarko Price $71.40 $71.77 $72.80 $72.93 $72.85 $72.37 $71.54

Update

May 5, 2019, Sunday

  • OXY affirms its bid of $76/share and increases cash component from $38 to $59. Deal would not require an OXY shareholder vote.
  • OXY also announced a sale of APC’s Africa assets to Total S.A. for $8.8 billion, contingent on completing the APC buy.
  • Anadarko states OXY bid under review for a “Superior Proposal” which if invoked allows Chevron four business days to revise its terms for APC.

May 6, 2019, Monday after market close

  • Anadarko deems the OXY proposal a “Superior Proposal.”
  • Chevron has four business days ending May 10 to submit a revised offer, extendable under defined certain conditions.

Finish Line

May 9, 2019, Thursday pre-market

  • Chevron declined to make a counter-proposal for Anadarko stating capital discipline, an advantaged portfolio and a 25% increase in share buyback program to $5 billion per year.
  • Chevron closed up 3.1% to $121.19 per share.
  • Anadarko closed down 3.3% to $73.39 per share.
  • Occidental closed down 6.4% to $56.33 per share.

For information regarding Drillinginfo’s Market Intelligence and Market Research products, click here.

This blog was last updated on May 9, 2019.

The following two tabs change content below.
Brian Lidsky

Brian Lidsky

Brian Lidsky, Senior Director, Drillinginfo Market Intelligence. Prior to joining Drillinginfo, Brian had roles including EVP and Board of Directors with John S. Herold, Inc., co-founder of private Canadian operator Vigilant Exploration, and Managing Director of PLS Inc. Brian holds a B.S. in Geology from Emory University and an MBA from Rice University’s Jesse H. Jones School of Business.