As confirmed by the company’s chairman and CEO, Michael Wirth, Chevron is planning to increase its buyback program to $5 billion if it successfully wins the bidding to acquire Anadarko. This was announced after they previously had disclosure of their intention to absorb Anadarko for $33 billion. However, Occidental Petroleum offered a higher counter-bid to Chevron’s initial pricing.
Initially, Chevron had intentions to buy back shares from their stockholders at $3 billion per year. This was eventually increased to $4 billion per year. Now, they are targeting to have the buyback program at $5 billion per year, a move that Wirth believes is an indication of their company’s growing strength. “It was an announcement we made to indicate our strong confidence in the cash flow accretion and value creation that this transaction enables, and so it is tied to the transaction,” the Chevron CEO adds.
According to Chevron’s Chief Financial Officer Pierre Breber, the company stopped the buyback program during the first quarter of the year due to its possession of publicly undisclosed information. That was what we now know as the plan to acquire Anadarko. They will most likely not be continuing the program during the second quarter until after the merger process is fully accomplished. Afterward, they will proceed to buy back shares again at $1.25 billion per quarter.
To acquire Anadarko, Chevron offered an initial bid of $65 per share, but Occidental countered it with a higher $76 per share proposal, challenging Chevron to make a better deal. When asked if there is a limit to how much Chevron will offer for the acquisition, Michael Wirth responded with a resounding yes. He said that their priority is to create value for their investors and that they do not need to do a transaction to fulfill that goal.
Both Chevron and Occidental Petroleum are confident that their companies will make the most out of the Anadarko acquisition. According to Occidental’s CEO Vicki Hollub, their company will be able to best utilize Anadarko’s existing areas of coverage, given their excellent track record in the Permian Basin. Chevron, on the other hand, has expressed certainty in the fact that they will make better use of the resources they will acquire from Anadarko.
Previously, Chevron’s shares fell in value by about 1.7% when they declared decreased profits during the first quarter, specifically a 27% drop from 2018. This was influenced by several factors, which includes drops in the price of oil.