07 May 2019

Chevron, Occidental battle for Permian acreage

Nothing showcases the increasing prominence of the Permian Basin more than the tussle for Anadarko, which has seen Occidental Petroleum square up against and go toe-to-toe with Chevron, the oil major and one of the world’s ten largest oil and gas producers by volume. That is not to say the oil and gas extraction sector has been lacking in the multi-billion-dollar dealmaking department prior to Chevron’s USD 50,000 million bid for Anadarko and Occidental’s subsequent rival offer of USD 57,000 million; far from it. Zephyr, the M&A database published by Bureau van Dijk, shows 20 acquisitions targeting the oil and gas extraction sector worth USD 20,000 million or more have been announced or completed globally since records began, these include TotalFina taking over Elf Aquitaine in 1999 for USD 58,656 million, Royal Dutch Shell completing the USD 57,091 million purchase of BG Group in 2016, British Petroleum Co acquiring Amoco in 1998 (USD 48,407 million) and ExxonMobil taking XTO Energy private for USD 41,000 million.

However, the battle over Anadarko and its near quarter million acres in the US’s top shale field, the Permian Basin, comes as dealmaking targeting the sector and related segments, such as drilling and oilfield services, begins to perk up following a slump due to the major correction in crude prices in 2014. The tussle also represents the largest oil and gas deal since Shells’ BG deal in 2016. In 2018 there were 316 announced acquisitions targeting the extraction, well drilling and oil and gas support activities sectors worth USD 164,028 million, compared to 623 deals totalling USD 211,005 million in 2014 before the impact of the change in oil prices was felt.

There are already mutterings the Anadarko acquisition could prompt further consolidation in the US, with Forbes pointing out major players could start targeting the likes of Concho Resources or DiamondBack Energy. With regards to Anadarko, Occidential has pulled out the big guns after announcing Warren Buffet has come down off the fence in its side as Berkshire Hathaway will provide USD 10,000 million in financing to help support the bid. It may well need this additional firepower if other Big Oils decide to weigh in on Anadarko, especially as Forbes said Wall Street is watching and waiting to see if Shell or ExxonMobil will throw their hats into the ring in a bid to gain acreage in the low-cost production shale play.

© Zephyr