Morningstar | Chevron Deal Helps Anadarko Shareholders Realize Value for Previously Undervalued Shares
We're raising our fair value estimate for Anadarko Petroleum to $69 per share following the announcement that Chevron will acquire the company in a stock and cash deal. Anadarko shareholders will get 0.3869 shares of Chevron and $16.25 in cash for each Anadarko share. At the current market price for Chevron of $119 per share, that translates to about $62 per share for Anadarko, right in line with where Anadarko shares are trading as we write. However, we think Chevron shares are worth $136, which is unchanged following the deal announcement. Because we think Chevron is moderately undervalued, we see Anadarko's shares as mildly undervalued as well.We think Anadarko shareholders are getting a pretty good deal. After updating our model for higher oil prices in the near term, we think Anadarko is worth $58 per share on a stand-alone basis (our previous fair value pre-oil-price-updates was $55). Before the announcement, we saw value in Anadarko's shares that was not realized by the market, with shares trading in 4-star territory. On April 11, the stock closed at $48.60 per share and is up more than 30% on April 12. We expect the deal will close as planned in the second half of 2019.
For more information on the deal from Chevron's perspective, please see our recently published Chevron note.
Anadarko Petroleum is an independent exploration and production company. The company also participates in the hard-minerals business through royalty arrangements. The company's reporting segments are as follows: Exploration and Production, which is engaged in the exploration, development, production, and sale of oil, natural gas, and natural-gas liquids (NGLs) and in advancing its Mozambique liquefied natural gas project toward final investment decision; and WES Midstream and Other Midstream, in which these two segments engage in gathering, processing, treating, and transporting the company and third-party oil, natural-gas, and NGL production as well as gathering and disposal of produced water.
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