According to industry expert Rystad Energy, the announcement that US Supermajor Chevron will acquire Anadarko Petroleum in a US$50bn deal reflects multiple trends that are becoming increasingly evident on the global energy market
Jarand Rystad, Rystad Energy founder and chief executive, said, “Energy giants recognise that they need to invest more in the shale sector and in renewable energy. At the same time, due also to the lower cost of capital prevalent, it makes sense for modern E&P companies to favour higher leverage and lower equity share, and instead use debt capital to fund investments and operations, while enhancing shareholder value through share buybacks and higher dividends.”
“This acquisition represents a golden opportunity for Chevron to achieve a more leveraged capital structure that is better suited for the lower risk energy projects of the future,” he added.
Looking at the respective asset portfolios of Chevron and Anadarko, Rystad Energy founding partner and head of research Per Magnus Nysveen remarked, “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 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 1.6mn bopd from the Permian basin alone,” he added.
Chevron and Anadarko, the 10th and 41st largest oil and gas producers in the world, respectively, will climb to seventh place after the merger. The new entity will jump in the rankings ahead of Shell and BP, trailing only ExxonMobil and the five largest national oil companies.
Rystad Energy also sees strong synergies between the two companies in the US Gulf of Mexico, where the merged entity will become the largest producer, surpassing current BP and Shell leaders. Synergies are also evident in East Africa, which is emerging as a vital region in the buoyant global liquefied natural gas (LNG) market. In Latin America, Chevron and Anadarko also have overlapping portfolios.
“Despite a 37 per cent premium, we think the deal value price of US$50bn is surprisingly good for Chevron. The implicit oil price in the deal is 60 US per barrel, while the oil price is 71 US per barrel. Adding synergies, we see a strong potential for value capture here,” Nysveen concluded.
