{"id":3085,"date":"2019-04-16T10:17:44","date_gmt":"2019-04-16T10:17:44","guid":{"rendered":"http:\/\/euromenaenergy.com\/?p=3085"},"modified":"2019-04-16T10:17:44","modified_gmt":"2019-04-16T10:17:44","slug":"chevrons-anadarko-bid-seen-heralding-permian-shale-deals","status":"publish","type":"post","link":"https:\/\/emimer.com\/?p=3085","title":{"rendered":"Chevron’s Anadarko Bid Seen Heralding Permian Shale Deals"},"content":{"rendered":"

Chevron Corp.\u2019s $33 billion bid for\u00a0Anadarko Petroleum Corp.\u00a0may presage a new Permian Basin buying spree, with\u00a0Pioneer Natural Resources Co.\u00a0and\u00a0Concho Resources Inc.\u00a0among the next prime targets.<\/p>\n

Pioneer, Concho and\u00a0Noble Energy Inc.\u00a0surged\u00a0Friday after Chevron unveiled plans to buy Anadarko, a deal that expands the supermajor\u2019s presence in the Permian region, Gulf of Mexico and East Africa. The transaction vaults Chevron into the rarefied air of rivals Exxon Mobil Corp. and Royal Dutch Shell Plc, which in turn may be roused to make acquisitions of their own.<\/p>\n

\u201cBest day in years,\u201d said Todd Heltman, senior energy analyst at Neuberger Berman Group LLC, which has $323 billion under management. \u201cThe space really needs consolidation. Maybe the time is finally right given the outperformance of the majors.\u201d<\/p>\n

Occidental Petroleum Corp., fresh off its own\u00a0failed bid\u00a0for Anadarko, may now find the tables have turned as its hefty footprint in the world\u2019s biggest oil field attracts the attention of acquisitive rivals. Investment bank Tudor Pickering Holt & Co and BP Capital Fund Advisors LLC both cited Occidental as a potential target.<\/p>\n

\u201cEveryone is trying to figure out who\u2019s next,\u201d Heltman said.<\/p>\n

\n
\n
\"Shale<\/div>\n<\/div>\n<\/figure>\n

\u201cFrom a big-picture perspective, the majors have really bought into shale, but from an asset perspective, the majors don\u2019t necessarily have the right asset portfolios,\u201d Tudor Pickering\u2019s Matthew Portillo said by telephone. \u201cWe do think this is going to be the spark that really catalyzes a lot of M&A.\u201d<\/p>\n

For Exxon, buying Pioneer or Concho would help the oil giant plug a hole in its Permian portfolio, Portillo said. Shell also will feel pressure to buy more acreage in the prolific stretch of West Texas and New Mexico, possibly by acquiring smaller players like\u00a0WPX Energy Inc.<\/a>\u00a0and\u00a0Cimarex Energy Co., Portillo said. BP Plc may too embark on expansionist takeovers, he added.<\/p>\n

Buying Neighbors<\/h3>\n

The peculiar nature of shale exploration is an impetus for acquisitions. Unlike in conventional oil fields, shale requires sideways drilling to access crude-soaked rocks, so the further a company can drill horizontally, the more oil it captures. In that context, buying neighboring drillers makes a lot of sense.<\/p>\n

For Chevron, Anadarko presented an enticing target. In addition to vast deepwater holdings in the Gulf of Mexico and an ambitious liquefied gas development in Mozambique, the company controls Permian drilling rights across an area twice the size of Los Angeles. Multiple layers of oil-rich shale extend for more than 1.5 miles (2.4 kilometers) underground within that zone.<\/p>\n

The most obvious target companies \u201care the ones that represent the same opportunity Anadarko presented to Chevron,\u201d said Ben Cook, a portfolio manager at BP Capital in Dallas. \u201cIt becomes a game of matching up maps.\u201d<\/p>\n

\n

What Bloomberg Intelligence Says<\/h3>\n

\u201cAnadarko was an acquisition target during a weaker price environment for the industry, so we\u2019re puzzled why it agreed to Chevron\u2019s offer when fundamentals are improving. The valuation is disappointing and we think other reasons are behind the deal. Expect Anadarko shareholders to resist the price despite passive-fund representation.\u201d
\n— Vincent G. Piazza and Evan Lee, analysts
\nClick here\u00a0to view the piece<\/p><\/blockquote>\n

In addition to Pioneer and Concho, Cook highlighted\u00a0EOG Resources Inc.,\u00a0Occidental\u00a0and\u00a0Parsley Energy Inc.\u00a0as names that could fit the bill for supermajors on the prowl. Noble was also floated as a top-three candidate in a note by RBC Capital Markets.<\/p>\n

\u201cYou see a deal like this and it does tend to kick off a wave of M&A activity,\u201d Cook said. \u201cThis is yet another confirmation that shale development and the short-cycle barrel is increasingly attractive to the majors.\u201d<\/p>\n

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\n
\n

High Overhead<\/h3>\n

Investors have pressured producers to cut administrative costs or consolidate<\/p>\n

Note: Chart shows expected 2019 general & administrative costs as a percentage of EBITDA esimates<\/p>\n<\/div>\n<\/div>\n<\/figure>\n

Investors have been pressing shale producers to consolidate in order to gut overhead costs and increase shareholder returns. In a note to clients the day before the deal was announced, Tudor Pickering said Anadarko continually came up in meetings as a high-cost standout. Chevron said it can axe about $1 billion a year in operating costs under the transaction, with another $1 billion in savings on capital expenditures.<\/p>\n

That may put pressure on other explorers with bloated administrative costs, driving \u201cmore meaningful industry consolidation,\u201d Tudor Pickering\u2019s Portillo said. \u201cThere\u2019s significant synergy opportunities.\u201d<\/p>\n

Spokespeople for Exxon, BP, Shell, WPX, Cimarex, Parsley, Noble, Pioneer, EOG, Occidental and Concho declined to comment or didn\u2019t immediately respond to requests.<\/p>\n

\u2014 With assistance by Alex Nussbaum, Tina Davis, Ryan Collins, and Kevin Crowley<\/em><\/p>\n

 <\/p>\n

https:\/\/www.bloomberg.com\/news\/articles\/2019-04-12\/chevron-s-anadarko-deal-seen-putting-permian-drillers-into-play<\/p>\n","protected":false},"excerpt":{"rendered":"

Chevron Corp.\u2019s $33 billion bid for\u00a0Anadarko Petroleum Corp.\u00a0may presage a new Permian Basin buying spree, with\u00a0Pioneer Natural Resources Co.\u00a0and\u00a0Concho Resources Inc.\u00a0among the next prime targets. Pioneer, Concho and\u00a0Noble Energy Inc.\u00a0surged\u00a0Friday after Chevron…<\/p>\n","protected":false},"author":1,"featured_media":3096,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[46,48,57,90,96,107,113,137,139,160,174,183,184,201,202,209,230,232,233,244,246,249,256,267,277,279,288],"class_list":["post-3085","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized","tag-aramco","tag-athens","tag-baroudi","tag-democracy","tag-doha","tag-embargo","tag-energy-peace","tag-gas","tag-gazprom","tag-international-maritime-disputes","tag-lebanon","tag-maritime-boundaries-east-mediterranean","tag-maritime-disputes","tag-offshore","tag-oil","tag-opec","tag-poverty-alleviation","tag-putin","tag-qatar","tag-rosneft","tag-roudi","tag-russia","tag-saudi","tag-straddling-hydrocarbons-reserves","tag-total","tag-trump","tag-usa"],"_links":{"self":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/3085","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3085"}],"version-history":[{"count":0,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/3085\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/media\/3096"}],"wp:attachment":[{"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3085"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3085"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3085"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}