Based on Anadarko's closing price of $46.80 on Thursday, Anadarko shareholders will receive 0.3869 shares of Chevron and $16.25 in cash for each Anadarko share.
There has been some pressure in energy markets as OPEC tries to push prices higher through production cuts. Anadarko also has a Mozambique LNG project, part of one of the industry's largest planned current investments.
Shares of Anadarko jumped 33 per cent Friday, while Chevron's stock fell 5 per cent.
Anadarko, which is based in The Woodlands, Texas, has always been rumored as a takeover target for the world's largest oil companies, offering a suite of assets including a massive LNG facility in Mozambique that's racing against Exxon's project to be the first operating in the country.
Anadarko had $13.4 billion in revenues previous year and pumped 666,000 barrels of oil equivalent per day.More news: Miami Heat icon Dwyane Wade bows out as LeBron James watches courtside
"This takes a great company and makes it even better", Chevron's Chairman and CEO Michael Wirth told CNBC's "Squawk Box" immediately after the news broke.
USA crude was selling for almost US$65 per barrel Friday.
As oil companies have become more efficient at producing shale oil, which has changed the global equation by making USA oil a rival against the cheap oil produced by Organization of the Petroleum Exporting Countries.
The US$65 per-share stock-and-cash deal announced Friday sees Chevron doubling down on its expansion into the fast-expanding Permian Basin of West Texas and New Mexico, while also increasing its exposure to liquefied natural gas with Anadarko's project in Mozambique.
"We will now see Chevron emerging as the clear leader among all Permian players, both in terms of production growth and as a cost leader", said Rystad Energy head of analysis Per Magnus Nysveen, noting that Anadarko's acreage is in the "sweetest spot" of the Delaware Basin.More news: Deeply regret Jallianwala Bagh massacre, says British PM Theresa May
The Anadarko deal was negotiated over the last few weeks, though Chevron has been thinking about the deal for some time, Wirth, a chemical engineer by training, said.
-Chevron will acquire all outstanding Anadarko shares for US$65 each, paying a mixture of cash and stock. That includes boosting its share buyback program from $4 billion to $5 billion per year. However, it wasn't the only bidder, as Occidental Petroleum reportedly offered more than $70 a share - so it's possible there could still be a bidding war for Anadarko.
The deal represents the 11th biggest ever for an energy and power company, according to Refinitiv. Chevron will issue about 200 million shares and pay approximately US$8b in cash.
The cash-and-stock deal announced Friday comes as United States crude prices have shot up 40 per cent this year.
The deal is expected to close in the second half of the year, subject to Anadarko shareholder approval, regulatory approvals and other customary closing conditions.More news: Donald Trump Reportedly Worried No One Will Remember George Washington, and … What?
Evercore and Goldman Sachs are financial advisers to Anadarko, while Wachtell, Lipton, Rosen & Katz and Vinson & Elkins LLP are its legal advisers. They will also assume about US$15 billion of net debt, giving Anadarko an enterprise value of US$50 billion.
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