Oxy Sets Deal for Anadarko Acquisition
Occidental Petroleum said May 9 after markets had closed that it had entered into a definitive agreement for its purchase of Anadarko Petroleum for $59/share in cash and 0.2934 Oxy shares for each Anadarko share. The transaction is valued at $57bn, including the assumption of Anadarko’s debt.
As previously announced, Occidental has also entered into a binding agreement to sell Anadarko’s African assets to French Total for $8.8bn. That deal is contingent on Oxy completing the Anadarko purchase, and is expected to close simultaneously to it, “or as soon as reasonably practicable afterwards,” Occidental said.
A key asset of the sale to Total is Anadarko’s 26.5% operating interest in the 12.8mn mt/yr Mozambique LNG project, which is expected to take a final investment decision on June 18.
The Occidental-Anadarko merger will create a $100bn-plus global energy company with some 1.3mn boe/day of production. It is expected to be accretive to cash flow and deliver $3.5bn of free cash flow improvement through $2bn of annual cost synergies and $1.5bn of annual capital reductions.
“This exciting transaction will create a global energy leader with a world-class portfolio, proven operational capabilities and industry leading free cash flow metrics,” Occidental CEO Vicki Hollub said. “This transaction further establishes Occidental as a premier operator in prolific global oil and gas regions with the ability to deliver production growth of 5% through investment in projects with industry-leading returns.”
Occidental expects to fund the cash portion of the transaction through a combination of cash from its balance sheet and fully-committed debt and equity financing, including the proceeds from Berkshire Hathaway’s $10bn investment. The transaction is not subject to any financing conditions or to Occidental shareholder approval.
And Oxy plans to clean up its balance sheet over the next 24 months by reducing debt through free cash flow growth and executing a planned portfolio optimisation strategy that will see the divestiture of up to $15bn of assets, including the Total deal.
The transaction is expected to close in the second half of 2019 and is subject to customary closing conditions, including approval from Anadarko’s shareholders and the receipt of regulatory approvals.