africa commodities Economy Energy Gas M&A Mozambique Natural Resources

African prospects on the battle for Anadarko Petroleum

As the markets witness a fierce battle for one of the most coveted oil acquisitions in recent history, the impact and the consequences for Anadarko’s projects in Africa are yet to be understood. Last month, Chevron announced that it had agreed on terms to buy Anadarko. In my view, from an African perspective, the deal made a lot of sense for several reasons which I have looked at in more detail in a previous article.

A few days later, Occidental Petroleum (Oxy), a fellow Houston-based American company roughly a quarter the size of Chevron (by market cap), started the first takeover battle for a major oil company in years, offering $38 billion for Anadarko, topping an already staggering US$33 billion offered by Chevron. The crown jewel of Anadarko is unquestionably, their Permian Basin assets in the US (a very significant shale field holding oil and gas deposits).

Reportedly, Anadarko’s board “unanimously determined” that Oxy’s evenly split cash and stock offer would likely be superior to the deal previously agreed with Chevron. Most analysts believe that it is very unlikely that Chevron will enter a bidding war. Last week there was a further announcement from Warren Buffet’s Berkshire Hathaway to commit as much as US$20B of investment into Oxy, contingent on the Anadarko deal closing.  A US$1B breakup fee if Anadarko walk away from the Chevron deal should be no pose itself as a big problem, however what does seem to be a more tricky point is Oxy shareholder’s resistance to the takeover.

Contrary to Chevron, Oxy is not a player in Africa, and neither is it active in the LNG space. The company’s exploration are in the US, the Middle East, and Colombia with petrochemical manufacturing in Canada, US and Chile.

Although when I first heard of Oxy’s moves towards Anadarko, Exxon came to my mind as the candidate to takeover the Mozambican assets after a deal is eventually completed,  it is no secret that MZ LNG project (Anadarko-led consortium focusing on Area 1) in the country is further developed than the Rovuma LNG project (Exxon/ENI, Area 4). Anadarko and its partners have done a great job getting their project approved with the Mozambican government and have been announcing SPAs since last year bringing the project closer to a Final Investment Decision (FID). Although one can argue that on the Rovuma LNG, the shareholders themselves can be significant off-takers to the extend that they could advance their project quite fast.

However, over the weekend it was announced that France’s TOTAL SA has agreed to acquire the African assets of Anadarko for $8.8 billion from Oxy should the deal goes ahead. While some may label me “optimistic”, I will again take a positive stance on TOTAL. I would even praise TOTAL as a better option from Chevron, at least for Mozambique.

TOTAL is no strange to Mozambique as it has been in the country since 1991. As a matter of fact, TOTAL also has operations in South Africa, Ghana and Algeria – the other African countries where Anadarko assets are located. TOTAL is well capitalised, knows Africa and although nothing has been announced specifically regarding Mozambique, I’m inclined to believe that they would see Anadarko’s original plans through as it fits their African strategy well. I remember coming across TOTAL quite often on the ground in Mozambique for a number of years as they were quietly looking for opportunities and inquiring on hydrocarbons licenses.

For optimism’s sake, I wish I could come to a closing on my thoughts speaking of an FID timeline as I did the last time I wrote about Anadarko, however to be realistic, the latest developments alone will likely add some significant time to the process, nevertheless, I will say again that not only Mozambique, but also South Africa, Ghana and Algeria will be in good hands if TOTAL is to inherit Anadarko’s assets in the continent.

At this moment, things are literally changing by the day so let’s keep our eyes open for updates, particularly regarding Mozambique.

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