Occidental wins Anadarko... is it the end?

May 17, 2019

 

With Occidental’s successful offer for Anadarko, what are we to expect for both the employees of Anadarko and The Woodlands?

 

Hello, my name is Paul Carroll. I'm the CEO and founder of Efficient Wealth Management, a boutique wealth management firm based in The Woodlands, Texas, and Austin, Texas.

 

Occidental has become the winner of quite the bidding contest. Paying $38 billion for Anadarko. Anadarko is the number one private employer in The Woodlands, Texas. With 3,700 mostly well-paid jobs there, employ two times as many people as ExxonMobil does within The Woodlands.

 

What we're seeing here is part of an industry consolidation, the asset plays out in Texas of becoming mature. Now there is this drive for efficiency and assets. And Occidental and Chevron both wanted those assets, but there was a difference. Chevron didn't need them like Occidental does. To become a real player, to not be a has been, to not be one of the small support players in this industry, Occidental needed Anadarko in a way that Chevron didn't. At least that's what they feel.

 

And so with such a large premium over the Chevron Dale, the Anadarko board was pretty much in a position of fiduciary liability to the stock holders if they did not accept this. But what of the landmark towers and the employees within The Woodlands? This is first foremost and almost entirely a West Texas shale asset purchase at this point of view. Yes, Occidental has some older buildings West of downtown Houston. They also have now, through Anadarko, a new building in downtown Houston.

 

There's a term in the auction market called the winner's curse. Has Occidental overpaid? Certainly, with their stock hitting a 10-year low last Friday, the market seemed to think that that's possible. They will be under intense pressure to sell assets. They've already sold some premium African assets to the French major Total, Warren Buffet, and other leverage means that they will be under increasing pressure to sell assets to clean up the balance sheet. Those towers in the Woodlands are probably worth more sold than moving people to them. That's just an economic reality. It's not a fact yet, but I would wager that the most marketable employees at Anadarko right now are looking for alternative employment.

 

We wish you the best of investing success.

 

Sources:

Hiller, Jennifer. “Bar Rises for Shale Takeovers as Chevron Bows out of Anadarko Fight.” Reuters, Thomson Reuters, 13 May 2019, www.reuters.com/article/us-anadarko-petrol-m-a-chevron/bar-rises-for-shale-takeovers-as-chevron-bows-out-of-anadarko-fight-idUSKCN1SJ0ES.

 

 

Whittington, Caitlin. “Occidental Emerges as Winner after Energy Giants Angle for Anadarko Merger.” Community Impact Newspaper, 14 May 2019, communityimpact.com/houston/the-woodlands/news/2019/05/14/occidental-emerges-as-winner-after-energy-giants-angle-for-anadarko-merger/.

 

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