Occidental Petroleum (OXY) has been one of the most watched stock since 2019. Its stock lost ~80% compared with the start of 2018 and lagged behind Chevron and the industry later on.
[XLE is State Street’s Energy Select Sector ETF fund; see its top holdings here]
Permian Oil Production
The Permian, the biggest shale basin in the US, has been one of the biggest drivers of a shale oil boom that helped make US the biggest oil producer in the world, ahead of Saudi Arabia and Russia.
According to the March 2020 productivity report, output from the Permian basin of Texas and New Mexico, is expected to rise 38,000 bpd to a record 4.79 million barrels per day (bpd) in April 2020.
Texas continues to produce more crude oil than any other state or region of the United States, accounting for 41% of the US total in 2019.
As mentioned in Occidental’s 2019 annual report, Permian accounts for more than 30% of the total United States oil production; Occidental has a leading position in the Permian Basin, producing approximately 10% of the total oil in the basin.
Chevron Bids For Anadarko Petroleum (APC)
As the competition in Permian intensifies, with Occidental and Chevron two leading operators, companies are looking for M&A opportunities.
Anadarko Petroleum is the 11th largest operator in Permian Basin; its Permian production (127 mboe/d) accounted for ~18% of its 2018Q4 production of 701 mboe/d. [Occidental Acquisition Proposal Presentation April 2019]
Chevron, another major player in Permian, announced its acquisition agreement with Anadarko on April 12, 2019.
Chevron was the No.1 in 2018 whole year production in Permian, but lost that seat to Occidental in 2018Q4 as shown above. Growth by acquisition seems to be the way to go for Chevron.
The total enterprise value of the transaction is $50 billion. Anadarko’s equity is valued at $33 billion, or $65 per share. Based on Chevron’s closing price on April 11th, 2019 and under the terms of the agreement, Anadarko shareholders will receive 0.3869 shares of Chevron and $16.25 in cash for each Anadarko share. (75% stock and 25% cash)
[Read more on Chevron’s acquisition presentation]