APRIL 15 - Chevron plans to buy Anadarko

CASPER — With a $33 billion cash and stock deal, Chevron’s planned acquisition of Anadarko Petroleum will create a new super major oil firm, with uncertain impacts in Wyoming, where Anadarko represents one of the largest players in the state’s oil and gas business.

The combined company’s first blush news was heavy on excitement for the Permian Basin — a prolific play in West Texas and New Mexico where both Anadarko and Chevron have a presence. Chevron will buy Anadarko as well as divest between $15 and $20 billion in assets in the next few years in order to reduce debt and reward shareholders, the company announced.

The sudden deal shocked the Wyoming oil and gas sector, and left most of the state’s oil and gas watchers wondering if Anadarko’s ubiquitous assets in the Cowboy State would be headed for the auction block.

Anadarko is a dominant presence in the DJ basin of Laramie County and one of a handful of large independents driving a drilling permit war in the Powder River Basin. It’s also been one of the larger lobbyists for oil and gas interests in the state for years and a community presence in towns like Casper. It’s a ubiquitous presence in the oil and gas policy, tax and drilling conversations of Wyoming and a sale of this magnitude was not expected.

Jimmy Goolsby, a longtime oil and gas consultant in Casper, said he was taken aback by the deal.

“I knew they were thinking of selling parts off, but I didn’t know the whole thing was going to go at one time,” he said.

Goolsby said the silence on Rockies assets in the initial comments following the sale could be notable.

Chevron effectively stepped out of Wyoming a few years ago, selling off its assets in the Cowboy State to focus elsewhere.

Michael Land, head of marketing for Kirkwood Oil and Gas in Casper, said it doesn’t seem likely that Chevron would now have a long-term goal of producing Wyoming assets.

“I don’t think that Chevron has any reason to revisit their strategy from a few years back,” he said. “They had a good chunk of production too, but they wanted out, and the price was right.”

Goolsby said he was concerned that Anadarko’s Wyoming and Colorado assets could be sold piece by piece.

“Companies like to get rid of things in one big lump, I’m sure that would be their preference,” he said. “I have no (insider) insight, but if they were to get rid of what’s in Colorado and Wyoming, that’s a pretty big bite.”

There probably won’t be many answers about the Wyoming side of Anadarko’s business until the two companies develop their integration plan after the deal closes — expected later this year — said Pete Obermueller, president of the Petroleum Association of Wyoming.

Chevron has experience in Wyoming, which could be seen as a positive, he stated.

“From a Wyoming standpoint, I’m not all that concerned about it, because the asset is so important that whether or not it stays in Chevron’s hands, I think that will end up working out for Wyoming,” Obermueller said. “It’s just a period of uncertainty.”

Anadarko’s future plans for Wyoming development have been a black box for some time. In recent earnings calls with investors the company’s leadership has noted the potential of the Powder River Basin and the company’s growing interest in exploring the play’s potential.

Anadarko is one of the largest permit-for-drill holders in Wyoming, largely for permits in the PRB and the Denver Basin to the south. It’s one of the five large oil and gas firms behind a 5,000 well oil and gas proposal in Converse County, a central program that would dictate much of the Powder’s development in the years to come if approved by the Bureau of Land Management. The agency’s final decision, likely the one proposed by industry, is expected soon.

Because the company’s significant land holdings straddle both sides of the Colorado-Wyoming border, the political uncertainty in Colorado for the industry had caused some to question whether Anadarko would be more willing to invest in Wyoming in years to come, shifting capital from a state interested in a transition to green energy to one that remains invested in the fossil fuel sectors.

Land said the Colorado story has put a damper on the Denver Basin, which extends into Wyoming — but unfairly so, he explained.

It’s an area of high potential, if unproven.

Anadarko has sought drilling permits in the Denver Basin alongside its significant acreage, though it hasn’t been actively drilling.

Its lack of activity has caused frustration with local mineral owners who’d like to see production of their minerals. Due to Anadarko’s extensive checkerboard ownership in the area, mineral owners argue that other operators have been hesitating to invest in drilling because Anadarko controls drilling areas.

Those mineral owners have appealed to the Oil and Gas Conservation Commission to block Anadarko’s drilling permits unless the company intends to immediately drill. The commission has not granted those requests, and landowners have appealed in one case to the courts.

Aside from the tangle of interests in the DJ, Anadarko’s holdings, soon to be Chevron’s holdings, are significant and another point of curiosity in the Chevron sale.

“Ownership of the checkerboard is such a unique asset,” said Brian Jeffries, senior vice president of marketing and logistics for Outrigger Energy in Denver. Jeffries is the former Wyoming Pipeline Authority executive director.

But the checkerboard also represents a challenge. The mix of ownership from private to federal and state makes the accumulation of a contiguous acreage position difficult, he said.

“The checkerboard stands in the way of that,” he said.

Some note that a sale of Anadarko assets could offer a tremendous opportunity, particular for smaller players in areas like the Powder River Basin.

For most, the Anadarko sale has raised more question than answers, and much of the Wyoming oil and gas sector is waiting, watching and wondering.

“I’m just looking forward to seeing what they want to sell and who they are going to sell it to,” Land said.