US oil and gas producer Occidental this morning tabled a $57bn (£44bn) bid for Anadarko Petroleum, outstripping rival Chevron’s $50bn offer for the company.
The deal would create a behemoth with production reaching more than 1.4m barrels of oil equivalent per day, Occidental said, and promises $2bn in annual cost synergies.
It would also deliver $1.5bn of annual capital reductions, improving free cash flow by $3.5bn.
Shares in the target rose 11.6 per cent in pre-market trading to $71.40, significantly below Occidental’s $76 per share offer. Occidental’s shares were trading down 8.5 per cent to $57.06, while Chevron fell 0.2 per cent.
Delaware-based Anadarko operates mainly in the US, with big assets in the Permian basin which stretches across parts of Texas and New Mexico.
“Occidental is a leader in using technological innovation to create value, and we will deploy our expertise to enhance the performance and productivity of Anadarko's assets not only in the Permian, but globally,” said Occidental chief executive Vicki Hollub.
“Occidental and Anadarko have a highly complementary asset portfolio, providing us with a unique opportunity to realise significant operating, cost, and capital allocation synergies and achieve near-term cash flow accretion.”
The deal, which will be paid half in cash and half in shares, betters Chevron’s offer by $7bn. It would make Occidental the largest producer in the Permian, with output hitting 533,000 barrels of oil equivalent per day.
“We have been focused on Anadarko for several years because we have long believed that we are ideally positioned to generate compelling value from a combination with them,” Hollub said.