SWEET SCIENCE FOR OIL & GAS

OR, HOW TO KNOCK-OUT AN OIL SUPERMAJOR

Hint: Have a Permian Granite Chin, an excellent cut-man in your corner, and call them out on your turf.

I can appreciate a great fight card. One that includes a dominating global heavyweight taking on a lower ranked and even smaller fighter, one the public sees barely as a contender. It is also 'Merican to root for an underdog. Even better is when the outcome being the underdog winning with grit, guts, and determination to win at all costs.

The recent TKO of Chevron by Oxy was a thrill to watch unfold. And the parallel to great fights is uncanny. From Thrilla in Manila Rope a Dope strategy to the psychological "No Mas" victory. Well done to both fighters, and appreciate the transparency of the overall process, which was a first for such a huge deal in this industry.

FIGHT CARD:

Lets break it down….

At weigh-ins, Chevron’s size, cash, and stock value obviously out-sized Oxy. Size difference of 6X in Total Assets, 8X in revenues, and total production by 4X.  Too big to …well, you know.

How to start a fight

• Chevron offers to purchase Anadarko for $33B and was awarded the prize (Belt). 
• Entering Chevron as a major player into the Pioneer and Oxy dominated Permian field.
• Oxy was turned down of their initial offer, one was higher than that of the Chevron, and the champion was named without a punch thrown.
• Oxy moved into full WTH mode viewing that as “them’s fighting words.”

Oxy, in true boxing hype form, raised eyebrows by calling out Chevron and Anadarko with a full press release. .. and to make it stang, anteid up an even bigger offer and put it into the face of Chevron.

FIGHT on!

Anadarko acknowledged scrappy Oxy as a viable contender and decided the belt was not properly awarded without consideration of them as a contender, and (re) set up a championship bout for the prize.

Fight prizes :

* Oxy – win all, or lose all.

* Chevron – keep the belt, or loose + a hefty consolation prize.

---- DING DING ---

Round One: Chevron wins - awarded the belt, without a punch thrown

Sparking the outrage from Oxy was Anadarko having accepted Chevron's offer to purchase Anadarko at 33B. And in typical closed-door private fashion.

Oxy, who put forth a higher bid of 37B, called BS. And called them both out, demanding a (re)match.

Oxy’s Corner: Chevron won? Them’s fighting words. Or actually, "We are the right acquirer ... because we can get the most out of the shale," said Occidental CEO Vicki Hollub.

Chevrons corner: We are not amused. Or actually, “We are confident the transaction agreed to by Chevron and Anadarko will be completed," Kent Robertson, manager for global external affairs for Chevron.

---

Second Round:  Oxy wins - on points

Oxy responds: Oh yeah, Bring it!.. And threw a $37B hat into the ring.

Chevron,’s corner: That was an unsolicited sucker punch. We are the champion. Or actually, "We are confident the transaction agreed to by Chevron and Anadarko will be completed.”

Oxy’s corner: Take that sucka! You’re in our hood now. Or actually, "We will deploy our expertise to enhance the performance and productivity of Anadarko's assets not only in the Permian, but globally," Occidental CEO Vicki Hollub.

Third Round: Draw

Judge Anadarko acknowledged the offer from Oxy, but states, "The Anadarko board has not made any determination as to whether Occidental's proposal constitutes, or could reasonably be expected to result in, a superior proposal under the terms of the Chevron Merger Agreement." Anadarko said in a statement.

Chevron’s Corner: See, I told ya! We got this. Or actually, "We are confident the transaction agreed to by Chevron and Anadarko will be completed.”

Oxy’s Corner:   Meh.   It aint over ‘til its over padnah. Or actually “We have long been convinced that a strategic combination with Anadarko represents a compelling opportunity for the shareholders of both Occidental and Anadarko...We look forward to Anadarko completing the next steps ..to complete this exciting transaction.” AKA, keep punching at us bro, we are still standing.

Fourth Round: DECISION: OXY –Winner by RTD

No Mas… Chevron throws in the towel. Chooses not to continue the bout to acquire Anadarko Petroleum. Prompted by Anadarko declaring Occidental’s bid “a superior proposal.”

• Oxy wins - acquires Anadarko Petroleum
• Chevron loses - walks with a $1 billion consolation prize.

Post fight commentary:

Chevron Corner: “Winning in any environment doesn’t mean winning at any cost. Cost and capital discipline always matter, and we will not dilute our returns or erode value for our shareholders for the sake of doing a deal,” Chevron Chairman and CEO Michael Wirth said in a statement.

"Capital discipline just earned our shareholders $1 billion," added a Chevron spokesman.

Oxy Corner: "We look forward to signing a merger agreement with Anadarko and realizing value for our shareholders as soon as possible," Oxy said in a statement following Chevron’s announcement that it would walk away.

Lets recap:

First smart move: Oxy brought it out to the public from the start. Typical mega mergers happen over years of private meetings and closed rooms. Instead, Oxy brought it out onto the streets almost immediately. Keeping the entire community, and world, watching it play out. And possibly limiting any “Don King” factors going on behind the scenes.

Second smart move: home turf advantage. 

The prize gives the winner championship, in the lucrative Permian, to be precise. The Permian is a place Oxy has won many bouts, and knows the area intimately. Chevron ubiquitous dominance is well represented in most areas across the globe, but not strong as Oxy in this particular region. Oxy knows all the punches, moves, and best takedowns on this home turf. Using home town advantage to a maximum, offering a scrappy strategy of taking the Anadarko assets and optimizing them to their level of excellence.

Third smart move: Have a great team in your corner.

When you are in the last round, your corner can be the difference between being knocked-out, and pulling off victory. In the case of Oxy, it’s good to have people like Warren Buffett in your corner.

"Stay in school and use your brain. 
Be a doctor, be a lawyer, carry a leather briefcase. 
Forget about sports as a profession. 
Sports make ya grunt and smell. 
See, be a thinker, not a stinker"

―Apollo Creed