Renewed bid from Occidental for Anadarko adds heat to Permian M&A

The battle for control of Anadarko Petroleum (APC) and its huge position in the oil shale geologies of the Permian Basis isn’t over.

Yesterday, Wednesday,  Occidential Petroleum (OXY) made a renewed bid to acquire Anadarko. The 50%/50% stock and cash offer from Occidental would value Anadarko at $38 billion. Chevron’s offer of 75% stock and 25% cash has a value of $33. Back on April 12 Anadarko’s board had agreed to a deal with Chevron in preference to an earlier offer from Occidental. Anadarko’s board said that it thought the Chevron offer was worth more to Anadarko shareholders because of the greater potential for capital gains from Chevron’s stock in comparison to Occidental’s.

The stock market still seems skeptical that Occidental’s new offer will either be accepted or will drive Chevron to make a higher bid. Anadarko shares were at $72.14 at 2:00 p.m. New York time on Thursday.  That’s below the $76 a share value of Occidental’s offer.Right now investors and traders are hard pressed to see the effect of the Occidental/Chevron battle on the price of other Permian producers. That’s because yesterday April 24 a big, surprise jump in U.S. oil inventories drove down oil prices and ended a run that had pushed oil price to their highest since October.

That ended a two-day run that had pushed prices to their highest since October.  The U.S. Energy Information Administration reported that U.S. stockpiles had climbed by 5.48 million barrels last week. That was the fourth increase in U.S. crude inventories in the last five weeks.That surprise increase in inventories was enough to send the prices of shares of U.S. producers down and that trend has continued today with shares of such prime Permian plans a Pioneer National Resources (PXD) and Parsley Energy (PE) down 2.13% and 2.53%, respectively as of 2 p.m. Ne York time on April 25.
But it looks to me that beyond this very near term reaction, the new bid from Occidental has turned up the heat under Permian assets. For example, today I’m seeing news stories speculating on a plan by ExxonMobil (XOM) to sell some of its assets in Nigeria in order to buy more production in the Permian. Speculation has mentioned Noble Energy (NBL) and Pioneer Natural Resources.

U.S. crude oil benchmark West Texas Intermediate is off 0.15% as of 2 p.m. today to $65.79 a barrel. International benchmark Brent crude is up 0.48% to $74.93 a barrel.

Pioneer Natural Resources is a member of my long-term 50 Stocks Portfolio. I added Parsley Energy to my 12-18 month Jubak Picks Portfolio on April 17, 2019.