Picture: 123RF/PIOTR TROJANOWSKI
Picture: 123RF/PIOTR TROJANOWSKI

Bengaluru  — Oil and gas producer Occidental Petroleum  sought to scuttle Chevron's takeover of Anadarko Petroleum  on Wednesday with a $57bn bid that raises the prospect of the first hostile battle for a major oil company in years.

The surprise $76-per-share proposal comes after Occidental repeatedly said in recent weeks that it had been trying to woo Anadarko in an effort to become the largest producer of oil in west Texas's Permian basin, where production has boomed in recent years.

Occidental's bid pushed Anadarko's share price in premarket trading above the $65 per share offered by Chevron. It said it had boosted the cash portion of its offer to 50% , up from earlier offers. The Chevron deal is comprised of 25% cash and 75% stock.

A deal would make Occidental the largest producer in the lucrative Permian, with total production of 533,000 barrels of oil equivalent production per day, the company said.

Shares of Anadarko were up more than 14%  at $73 in premarket trading, while Occidental shares were down 8% at $57.38.

Occidental said on Wednesday in a letter to Anadarko's board that it had made two proposals of "significantly higher value" to that made by Chevron since April 8.

Anadarko would also be liable to pay Chevron a $1bn break-even fee if its board chooses to go with Occidental's offer.

"It is unfortunate that Anadarko agreed to pay a break up fee of $1bn, representing approximately $2 per share, without even picking up the phone to speak to us after we made two proposals during the week of April 8," Occidental president and CEO Vicki Hollub said in a letter to Anadarko's board on Wednesday.

Some analysts were sceptical of the offer.

"This is not a smart move on part of Occidental given the difference of size between the two companies," said Raymond James analyst Muhammed Ghulam.

"Chevron is much bigger and has the resources to combine the two companies and has significant deep water experience," Ghulam said, referring to Anadarko's  Gulf of Mexico assets.

Analysts have said they expect the industry to consolidate more as small oil producers, who revolutionised the sector through advances in horizontal drilling and hydraulic fracking, have had to cut spending as investors press for higher returns and their stock prices languish.

The Permian produces about 4-million barrels per day, and is expected to hit 5.4-million bpd by 2023, according to IHS Markit, more than the total production of any Opec country other than Saudi Arabia.

Occidental's $76 per share offer comprises $38 in cash and 0.6094 of its shares. The offer represents a premium of 19% to Anadarko's closing price on Tuesday and 62%  to the closing price on April 11, the day before Chevron made its bid.

Under Chevron's $65 per share bid, Anadarko shareholders are set to receive 0.3869 shares of Chevron and $16.25 in cash for each Anadarko share.

Chevron's shares fell 0.5% after the announcement while Occidental was trading down 4.5% at $59.55.

Reuters