Oxy’s $8.8bn Total Deal ‘May Soothe Anadarko Shareholder Jitters’

(WoodMac, 6.May.2019) — In another bold move in its takeover battle with Chevron for Anadarko Petroleum, on 5 May said Occidental Petroleum entered into a binding agreement to sell Anadarko’s Algeria, Ghana, Mozambique and South Africa assets to French major Total for US$8.8 billion. The deal is contingent on Oxy succeeding in its bid for Anadarko.

Greig Aitken, director, M&A research, at global natural resources consultancy Wood Mackenzie, said: “This is a move that will alleviate the concerns of Anadarko’s shareholders. Anadarko’s main concern appears to be uncertainty regarding the execution of the deal – can Oxy finance the deal; will the bid value erode due to a falling share price; will its shareholders acquiesce?

“Combined with the recent US$10 billion Berkshire Hathaway commitment, this disposal has allowed Oxy to increase the cash component of its bid from 50% to 76% (an increase of approximately US$10.5 billion). The new proposal does not require a vote from Oxy’s shareholders.

“Oxy’s offer is currently 23% higher than Chevron’s bid, with a materially larger cash component. With added certainty around Oxy’s ability to complete the deal, it will be very difficult for Anadarko not to accept. Chevron has the firepower to increase its offer, but will have to decide whether it also has the appetite.”  

Aitken said Occidental is predominantly an onshore operator with expertise in tight oil and enhanced oil recovery in the US and the Middle East. It does not have experience of liquefied natural gas (LNG) operatorship. The deal would allow Occidental to achieve between 60-90% of its US$10 billion to US$15 billion disposal target in one swoop.

He added: “The US$8.8 billion deal is very sellable to Total’s shareholders. The transaction plays to Total’s strengths in deepwater and LNG; bolsters the company’s core Africa holdings, and adds material volumes with long-term growth potential.

“Total would gain material oil, LNG and exploration holdings. In oil, Total will consolidate its position in Algeria’s Hassi Berkine oil field and add a new deepwater oil position in Ghana.

“Total will also grow its gas business, a core long-term objective for the company. Anadarko’s Area 1 LNG project in Mozambique did not sit naturally in Oxy’s portfolio. But it provides Total with a new greenfield LNG development for which sanction is imminent. The project has the potential for multiple brownfield expansions. The deal also includes exploration acreage in South Africa close to Total’s recent Brulpadda gas discovery.”

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