Chevron refused Thursday to raise its $33 billion offer for Anadarko Petroleum to counter a bid from rival Occidental Petroleum, a move it expects will lead to the deal’s collapse.
“Winning in any environment doesn’t mean winning at any cost,” Chevron CEO Michael Wirth said in a statement. “We will not dilute our returns or erode value for shareholders for the sake of doing a deal.”
Anadarko notified Wirth earlier this week that its board had deemed Occidental’s $38 billion offer superior and confirmed that it would pay Chevron a $1 billion fee if it terminated the earlier deal to take advantage.
Chevron’s agreement to buy Houston-based Anadarko, announced in April, would have broadened its access to the Permian Basin, the largest oil region in the continental U.S. as President Trump pushes the country to produce enough fuel to meet its own energy needs.
Once the transaction is scrapped, Chevron said it would use the termination fee to increase share repurchases by 25%, to $5 billion a year. “We are well positioned to deliver superior value creation,” Wirth said.
Chevron controls 2.2 million acres in the Permian, a swath of land in western Texas and southeastern New Mexico that’s 250 miles wide and about 300 miles long, even without adding Anadarko’s holdings.
The U.S. has become the world’s largest oil producer, outpacing both Russia and Saudi Arabia, thanks largely to technological advances that let producers extract oil from shale formations including those in the Permian.
Achieving energy independence was one of Trump’s signature campaign promises in 2016, a commitment based on concern that U.S. reliance on oil imports left the country more vulnerable and cost American jobs.
“We’re ending the theft of American prosperity and rebuilding our beloved country,” Trump said when he signed an executive order prompting energy independence just two months after taking office. “We will unlock job-producing natural gas, oil and shale energy.”
Purchasing Anadarko, a deal enabled partly by a commitment of $10 billion from Warren Buffett’s Berkshire Hathaway, will allow Occidental to capitalize on that trend.
“We’ve studied this opportunity for almost two years,” Occidental CEO Vicki Hollub said Monday. “This is a key long-term decision for us, and we understand what a great opportunity this is for us and our shareholders.”
Chevron climbed 2.9% to $120.89 in New York trading on Thursday, while Occidental tumbled 5.5% to $56.88.
