Anadarko Petroleum

On July 20, 2020, Chevron struck the first major energy sector deal since the onset of the pandemic, announcing a $13 billion agreement to acquire U.S. E&P Noble Energy. The transaction comes 15 months after the oil major bowed out of a bidding war with Occidental Petroleum to acquire Anadarko Petroleum, a landmark, $56 billion deal in which the winner may eventually end up as the loser after taking on massive debt. Oxy is just one example of how the sharp decline in oil demand and prices has ravaged producer cash flows and earnings, virtually freezing the M&A market. Despite widespread speculation that a resumption in deal activity would target the most distressed E&Ps, Chevron has broken the market wide open with a blockbuster deal for a premier E&P. The target this time, Noble Energy, has a portfolio very similar to that of Anadarko, and is being acquired at a small fraction of the cost. Today, we examine the strategies that drove this transaction, the impacts on buyer and seller, and the implications for the upstream M&A market going forward.

Occidental Petroleum’s recent acquisition of Anadarko Petroleum made Oxy the #1 producer in the Denver-Julesburg (D-J) Basin and gave it a majority stake in Western Midstream Partners, which owns crude-gathering and other midstream assets in the D-J, the Permian and the Marcellus. While Western Midstream’s gathering focus had been on helping Anadarko meet its own midstream needs, Oxy sees the partnership taking on a broader role as a provider of gathering services to third parties as well. Toward that end, Oxy and Western Midstream a few days ago announced a series of agreements designed to allow Western Midstream to operate as an independent company. Today, we continue a series on crude-related infrastructure in the D-J with a look at Western Midstream’s gathering and related assets owned in part by the basin’s largest oil, natural gas and NGL producer.

Adapting to a new era of low crude oil and natural gas prices, U.S. exploration and production companies, have been reconfiguring their portfolios to focus on a small group of shale plays whose production economics can hold up even through tough times. Among the largest producers, no company is a better example of this trend than Anadarko Petroleum, which has sold over $12 billion in assets since the beginning of 2014—including properties that generated one-third of its 2016 production—to focus 80% of its capital investment on just three U.S. plays. Since year-end 2013, Anadarko has lowered its net debt by 16%, or $8 billion, and it exited 2016 with over $8 billion in liquidity. The company forecasts 15% compound annual production growth through 2021 at current prices, with the liquids weighting of output increasing from 44% in 2015 to 65% in 2021. Today we zero in on one of the 43 E&Ps whose new-era strategies are detailed in RBN’s new Piranha! market study.

Deepwater and ultra-deepwater crude oil production projects in the Gulf of Mexico (GOM) are complex and take years to complete, so the several GOM projects on which exploration and production companies made final investment decisions in 2012-14 are only now coming online—just in time, it turns out, for the lowest oil prices in a dozen years.  So there’s this irony: Crude is selling for little more than $30/Bbl, but the new projects coming online in 2016 and beyond are likely to bring GOM production to record highs. Today, we continue our examination of still-rising production in the GOM with a review of more projects increasing the Gulf’s output.