Occidental Issues Competing Bid for Anadarko

Andarko's Heidelberg deepwater spar platform in the U.S. Gulf of Mexico (Anadarko)

By The Maritime Executive 04-24-2019 11:03:49

Occidental Petroleum has issued a $57 billion bid for Anadarko, easily topping Chevron's earlier offer of $50 billion in cash, stock and debt. 

Oxy, which has no presence in the U.S. Gulf of Mexico, would be buying one of the largest offshore leaseholders in the region. Anadarko has 10 operated floating facilities on the U.S. continental shelf, more than any other firm, including two large spar platforms installed in 2015 and 2016. It has a long history in the area: it was the first company to drill out of sight of land on the Gulf Coast. Anadarko's current development activities are focused on tiebacks to existing infrastructure, leveraging its assets to avoid the expense of new platforms. 

Oxy is offering current Anadarko shareholders $38 per share in cash, plus a swap of 0.61 shares of Oxy per share of Anadarko, for a total value of about $76 per share. Chevron is offering a combined $65 per share in cash and stock. 

If Anadarko accepts Chevron's lower bid instead, it would be choosing a partner with synergistic holdings in the Gulf, with complementary offshore lease areas that would offer new opportunities for tieback projects. On shore, Chevron's assets in the Permian Basin align with Anadarko's extensive holdings in Loving and Reeves Counties, which is perhaps the largest motivating factor for Chevron's bid. 

In anticipation of the Occidental bid, Mizuho Securities downgraded its target price for Occidental's stock and panned the possibility of an Oxy-led merger. In a note to clients, Mizuho analyst Paul Sankey asserted that the bid was a "very bad idea," and suggested that leading Oxy shareholders were not pleased. Occidental Petroleum's stock dropped after the bid announcement. 

In comments to CNBC, Occidental CEO Vicki Hollub said that the justification for the bid was the opportunity to acquire Anadarko's extensive Permian Basin shale holdings. Oxy is performing better than its rivals in extracting shale oil at low cost, she said, and it would be able to apply its expertise to Anadarko's leases.