Chevron set to become fourth ultramajor with US$33bn buyout of Anadarko Petroleum

CHEVRON has agreed to buy Anadarko Petroleum for US$33bn, propelling it into the position of fourth ‘ultramajor’ and the largest producer in the fast-growing US Permian Basin, and the Gulf of Mexico.

Anadarko is one of the world’s largest independent exploration and production companies, with 1.47bn bbl of proven reserves in 2018. Including Anadarko’s debt, the value of the deal climbs to US$50bn making it the largest purchase in oil and gas since Shell agreed to buy BG Group for US$54bn in 2015.

Commenting on the deal, Per Magnus Nysveen, Head of Research at consultancy Rystad Energy, said: "We have always considered Anadarko as having the best-positioned acreage in the sweetest spot of the Permian Delaware basin. Combining these shale assets with Chevron’s strong legacy position in the same area, we will now see Chevron emerging as the clear leader among all Permian players, both in terms of production growth and as a cost leader."

The combination knits together a 120-km-wide corridor of acreage across the Delaware Permian Basin. Production from the basin has been boosted by technological advances including horizontal drilling and hydraulic fracturing, and the resulting oil and gas output is feeding a multi-billion dollar investment in chemicals plants in the US.

On the potential of the wider Permian Basin, analyst IHS Markit said last year that in the previous two years, production from the region had grown more than any other entire country, and projected that with another 3m bbl/d of output expected by 2023, the total output of 5.4m bbl/d will exceed the current production of every OPEC nation except for Saudi Arabia.

Nysveen said: "The combined entity will be by far the largest producer in the Permian, which is the fastest growing basin in the world, well ahead of ExxonMobil. By 2025 the merged entity will be able to produce as much 1.6m bbl/d of oil from the Permian basin alone."

He added that the combined company will also become the largest producer in the Gulf of Mexico, surpassing current leaders BP and Shell.

Roy Martin, Senior Research Analyst at energy consultancy Wood Mackenzie, said: Chevron now joins the ranks of the ultramajors – and the big three becomes the big four,” referring to BP, ExxonMobil and Shell.

“Once the deal closes, Chevron will be the second-largest producing major in 2019 terms. It was fourth.”

Chevron will also gain Anadarko’s LNG project in Mozambique, with a final investment decision on the project expected soon.

Announcing the deal, Chevron said it expects the tie-up will save US$1bn in operating costs and another US$1bn in capital spending one year after closing the deal. Chevron said it also plans to sell US$15-20bn worth of assets between 2020 and 2022.

The deal has been approved by the boards of both companies and subject to regulatory approvals is expected to close in second half of 2019.