Latest update on OXY latest offer for Anadarko
Occidental’s higher $38 billion offer for Anadarko just got a little better. Over the weekend, Occidental increased the cash part of the bid from 50% to 78%, adding they would cover the $1 billion breakup fee with Chevron. The improved offer was possible after Occidental announced if the deal was successful, they would sell the African operations to Total for $8.8 billion. Carl Icahn also acquired a minor stake on May 3rd, but is not expected to sway the debate. The current Occidental offer is $11 a share higher than Chevron.
Occidental’s earnings Preview
Occidental Petroleum is expected to deliver a 23% decline in EPS to $0.71, while Revenues rise 5% to $4.0 billion. Historically we see them beat on both the top and bottom line 75% of the time.
With oil around $60 a barrel, OXY can deliver on dividend and output expansion. Shareholders are not happy with the stock’s recent performance and may want a vote against the deal, but the raising of $10 billion preferred-stock investment from Buffett’s Berkshire may reduce thresholds of new equity below the 20% level, thus not forcing a vote.
More Mergers to come
Occidental Petroleum improved the composition of its offer for Anadarko ahead of their Tuesday earnings. Markets are unsure if Chevron will up its offer, they easily can, but may set their eyes on another company. The oil industry is likely to see continued consolidation with possibly Apache, Parsley, Pioneer Nat or Concho.
If Chevron does win the Anadarko deal, they will match Exxon and Shell’s production in the Permian. It is clear that Chevron is a better fit for Anadarko based on integration, but they may not want to continue this bidding war.
If oil retraces closer to the mid-point of the recent range ($45 to $65), we could see more multiple independent exploration outfits consolidate.
