NEW YORK — A bidding war is breaking out over Anadarko Petroleum, with Occidental making an offer that it says is about a 20% premium to Chevron's deal announced earlier this month, a rare move not often seen in the U.S. oil industry.
Houston-based Occidental Petroleum Corp. said the proposed combination would bolster its position in the Permian Basin in Texas and New Mexico, where it is already the largest oil producer.
Chevron's deal for Occidental would energize its oil and gas drilling capabilities in Texas but also the Gulf of Mexico, an important market for Louisiana. The combination of assets potentially would make Chevron the largest oil producer in the gulf, assuming it keeps all of its rigs and doesn’t shed anything as part of a merger.
David Dismukes, head of the Center for Energy Studies at LSU, said while Occidental has a presence in Louisiana, it’s mainly on the petrochemical side. The company’s OxyChem subsidiary manufactures chlorine and caustics at plants in Convent and Geismar.
Occidental has a big presence in the Permian Basin, so making a move for Anadarko is a case of “doubling down” in the region, Dismukes said. But the kind of synergy Occidental's deal would generate for oil drilling in the Gulf of Mexico is not obvious, Dismukes said. “It’s not real clear how this looks good for us,” he said.
He previously said putting Chevron and Anadarko together will create synergy in the gulf. “This enhances the competitiveness of the merged company because they bring the best of what both have learned,” he said. “There’s a lot they both bring to the table.”
Occidental on Wednesday put the value of its proposal at $57 billion, including debt and book value of noncontrolling interest. Chevron's deal was valued at $50 billion including debt and book value of non-controlling interest.
In a letter to Anadarko's board of directors, Occidental President and CEO Vicki Hollub said Occidental made three proposals to acquire Anadarko since late March,and that each offer was significantly higher than what Anadarko accepted from Chevron. She said Occidental was surprised and disappointed that Anadarko didn't engage with Occidental on a previous proposal.
Chevron, of San Ramon, California, and Anadarko, based in The Woodlands, Texas, did not immediately respond to requests for comment.
It appears Occidental's management team didn't feel it could negotiate successfully with the Anadarko board and management, so it took the proposal directly to shareholders, said Leo Mariani, managing director and equity research analyst with KeyBanc Capital Markets.