Occidental Petroleum said on Wednesday that it is proposing to buy Anadarko at a higher price than the one Anadarko had accepted from Chevron, potentially opening a bidding war for one of the US companies with the strongest positions in the Permian.
Anadarko owns prized land in the Permian Basin, the shale oilfield in West Texas.
The surprise $76-per-share bid comes after Occidental had been trying to woo Anadarko and had made two other proposals since late March.
According to reports, Occidental had already made a higher $70 a share offer for Anadarko that was rejected by the board in favour of Chevron's approach. Anadarko plans to reply to the offer later in the day, a spokesman said.
Occidental Petroleum (OXY) revealed a $76-a-share offer on Wednesday to acquire oil driller Anadarko Petroleum.
Occidental puts the value of its deal at $57 billion, including debt and book value of non-controlling interest. And it's not immediately obvious how Occidental would fund Anadarko's giant liquefied natural gas plant that's being developed in Mozambique, although Hollub said Wednesday on a conference call with analysts that her company is capable of handing the project.
Occidental shares dropped 6% in premarket trading on Wednesday.
Occidental's offer is split 50/50 between cash and stock. The acquisition consideration is structured as 75 percent stock and 25 percent cash, providing an overall value of US$65 per share based on the closing price of Chevron stock on April 11, 2019.
"We feel very confident we're going to be able to achieve value add for our shareholders".
Anadarko would also be liable to pay Chevron a $1 billion break-even fee if its board chooses to go with Occidental's offer.
Occidental is "going head-to-head against a supermajor four times its size" and Chevron is likely to emerge as the victor for Anadarko, said Pavel Molchanov of Raymond James.
The Anadarko board will have to give the Occidental offer "strong consideration", and would be "hard pressed" to reject it outright even though it clearly prefers to sell to Chevron, said Brian Kessens, portfolio manager at Tortoise Capital, which holds shares in an Anadarko pipeline business and in Chevron. The basin, which straddles New Mexico and Texas, is the most promising shale oilfield in the world. Small oil producers revolutionized the sector through advances in horizontal drilling and fracking, but their stock prices have languished with investors pressing for higher returns. The offer represents a premium of 19 percent to Anadarko's closing price on Tuesday and 62 percent to the closing price on April 11, the day before Chevron made its bid. The area has been central to the U.S. energy revival over the last decade. Production is expected to reach 5.4 million barrels a day by 2023, more than the total production of any nation in the Opec cartel except for Saudi Arabia, figures from IHS Markit suggest.
"The Anadarko board expects to respond to Occidental's proposal upon completing its review, and accordingly reaffirms its existing recommendation of the transaction with Chevron at this time".
Chevron has said it would pay the equivalent of $65 per share, which includes 0.3869 shares of Chevron and $16.25 in cash for each Anadarko share.