A bidding war has emerged in America’s shale oil patch.
Occidental Petroleum (OXY) revealed a $76-a-share offer on Wednesday to acquire oil driller Anadarko Petroleum. (APC)
The cash-and-stock offer from Occidental is about 20% richer than the $33 billion takeover deal Anadarko reached earlier this month with energy giant Chevron (CVX).
Anadarko’s shares soared 11% in premarket trading on Wednesday.
The bidding war underlines the frenzy among oil companies to grab the hottest drilling properties in America’s shale oil boom.
Anadarko owns prized land in the Permian Basin, the shale oilfield in West Texas. The surging Permian has catapulted the United States beyond Russia and Saudi Arabia as the
world’s leading oil producer.
“We will deploy our expertise to enhance the performance and productivity of Anadarko’s assets not only in the Permian, but globally,” Occidental CEO Vicki Hollub said in a
Occidental said acquiring Anadarko would bolster its position as the No. 1 producer in the Permian, with 533,000 barrels per day of daily production.
“The Permian is a spectacular resource,” said Ryan Fitzmaurice, energy strategist at Rabobank. “It’s already producing more than the majority of OPEC members. And there’s a
lot of runway there.”
A marriage between Occidental and Anadarko would create an energy giant worth over $100 billion with daily production of more than 1.4 million barrels of oil.
Hollub said Occidental has been “focused” on Anadarko for “several years” because it believes the two companies are a good match.
Beyond the Permian Basin, Anadarko owns shale assets in Colorado as well as valuable deepwater drilling properties in the Gulf of Mexico. Anadarko is also a player in
Mozambique, where it has a liquefied natural gas project.
Occidental’s offer is split 50/50 between cash and stock. The bid values Anadarko at $57 billion, including debt.
Soon after Chevron reached its cash-and-stock deal for Anadarko on April 12 reports emerged indicating Occidental had been planning its own offer.
Occidental said the Anadarko deal would immediately add to its bottom line and cash flow. The company estimated $3.5 billion of free cash flow improvements through $2 billion
of cost synergies and $1.5 billion of capital reductions.
Neither Chevron nor Anadarko responded to requests for comment.
Occidental shares dropped 6% in premarket trading on Wednesday.
The oil supermajors were late to the shale oil boom, leaving the early work to independent drillers like Anadarko and EOG Resources (EOG). But Exxon, Chevron and BP have
spent billions of dollars in recent years to play catch-up and are all now significant players in shale.