Chevron Won't Counterbid for Anadarko--3rd Update

By Bradley Olson and Micah Maidenberg 

Chevron Corp. is bowing out of the bidding to buy Anadarko Petroleum Corp., setting the stage for Occidental Petroleum Corp. to win its pursuit of a company almost its same size.

"Costs and capital discipline always matter," Chevron Chief Executive Michael Wirth said in an interview. "An increased offer would have eroded value to our shareholders and it would have diminished our returns on capital."

Chevron had agreed on April 12 to purchase Anadarko for about $33 billion, but Occidental Petroleum Corp. offered the oil company $38 billion on April 24 and then boosted the cash portion of its offer on Sunday.

In seeking Anadarko, both companies were focused on prized assets in the Permian Basin in West Texas and New Mexico, the heart of the U.S. oil boom. Occidental's emergence as the likely victor would conclude one of the more acrimonious energy-deal sagas in recent years.

Occidental's increasingly aggressive efforts to win in the contest for Anadarko -- including lining up a $19 billion war chest with Berkshire Hathaway Inc. and French oil giant Total SA -- helped Chief Executive Vicki Hollub outduel a much larger rival.

Now, Ms. Hollub must work to win over skeptical Occidental shareholders, some of whom have said they plan to vote against the company's board at its annual meeting Friday.

Chevron said it expects Anadarko to terminate the companies' merger agreement. Anadarko said Monday it considered Occidental's offer superior to Chevron's bid and the companies are now expected to complete the terms of the deal.

Interactions between Anadarko and Occidental have been terse, including most recently on Sunday, when Ms. Hollub said in a letter to Anadarko's board that she objected to its requests for three board seats.

"We look forward to signing a merger agreement with Anadarko and realizing value for our stakeholders as soon as possible," Occidental said in a statement.

Mr. Wirth said Chevron could have outbid Occidental, but instead will take a $1 billion termination fee from the company. Chevron also said Thursday it plans to increase its stock buyback rate by 25% to $5 billion a year.

Going forward, Mr. Wirth said Chevron would only consider an acquisition if it is "exceptionally good." Without a deal, the company expects to triple production in the Permian to 900,000 barrels a day of oil and gas in five years. It is now the leading producer in the region, but a combined Occidental-Anadarko would emerge as the top operator post-deal. He declined to comment on negotiations.

"We prefer to do friendly deals and we prefer to negotiate them out of the limelight," he said. "To the extent this became something other than that, that's not the way Chevron operates."

Occidental secured $10 billion in backing from Warren Buffett's Berkshire Hathaway Inc. for its offer for Anadarko. The company also agreed to sell Anadarko's Africa assets to Total for $8.8 billion in the event it completes an acquisition of Anadarko.

Both moves strengthened Occidental's financial position as it sought to acquire a company of almost equal size.

Write to Bradley Olson at [e-mail] and Micah Maidenberg at [e-mail]

(END) Dow Jones Newswires

May 09, 2019 10:39 ET (14:39 GMT)

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