Anadarko begins negotiations with Occidental Petroleum Corp in bid to sell itself

Anadarko holds vasts fields of oil and gas deposits which can be easily accessed using low-cost drilling methods – these assets underscore the value of the bidding war surrounding the U.S. oil and gas exploration and production company.

According to sources familiar with the matter at hand, while earlier U.S. oil and gas exploration and production company, Anadarko Petroleum Corp, had agreed to sell itself to Chevron Corp for $33 billion, it has now begun negotiations to sell itself to Occidental Petroleum Corp instead.

The bidding war over Anadarko underscores the value of its assets in the lucrative Permian Basin of West Texas and New Mexico. These basins hold vast shale field reserves of oil and gas deposits which companies can extract for decades using low-cost drilling methods.

According to sources, Anadarko’s board is of the opinion that Occidental’s $38 billion cash-and-stock bid could lead to a deal that would be superior to the one it has with Chevron.

There is no certainty that Occidental, which was vying for Anadarko before Chevron clinched its deal, will be able to secure its own deal, said sources.

However, in the event that it does clinch such a deal, Chevron will be given a chance to match the new deal amount. According to the terms of Anadarko’s agreement with Chevron, in the event that the latter loses out to Occidental, Anadarko would have to pay Chevron a break-up fee of $1 billion.

Sources have preferred the cover of anonymity since the matter is confidential.

Neither Anadarko nor Occidental immediately respond to requests for comments.

Chevron’s spokesman Kent Robertson declined any immediate comment.

If Occidental manages to secure a deal, it would add nearly a quarter million acres to Occidental’s holdings in the Permian shale basin, and double its global oil and gas production to 1.4 million barrels of oil equivalent per day.

Significantly, during negotiations, Occidental has to overcome a key hurdle of getting a deal which is contingent on getting it approved by its shareholders. In comparison, for Anadarko, a deal with Chevron offers more certainty since Chevron shareholders don’t have a say in the matter.

However, Anadarko’s shareholders will be given a vote on the sale of the company, be it either with Occidental or Chevron.

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