Warren Buffett, Vicki Hollub, OXY, Anadarko, And All That Jazz -- May 16, 2019

Updates

February 15, 2020: idle rambling on a Saturday night. 

August 7, 2019: financing.

July 22, 2019: Buffett's deal --

Buffett will receive an 8% return on his preferred shares to finance the deal plus warrants to buy common shares, a similar structure the financier used before in taking stakes in Bank of America Corp. and Goldman Sachs Group Inc. Icahn claimed that at least one large investor that he knows of would have provided the financing without the warrants.

The financing deal: $10 billion. Buffet getting $800 million / year on this deal? [Ten year bond? about 2%.]

June 10, 2019: Rigzone analysis.

• 10,000 drilling sites
• pipeline assets: $8 billion
• Algerian assets: $9 billion
• price of Anadarko: $40 billion
• $40 billion - $20 billion (asset sales) = $20 billion
• $20 billion / 10,000 wells = $2 million / well
• EURs of 1 million bbls @ $50/bbl = $50 million / well

June 4, 2019: update on debt concerns here. 

Original Post

 
Anyone who can convince Warren Buffett to spend $10 billion on shale in a 90-minute meeting has my vote.

It would be interesting to see the details. Buffett is generally pretty shrewd. My hunch: he gets his $10 billion back before OXY shareholders see their gains. 

Re-posting:

OXY - Anadarko

Also from twitter: OXY-Anadarko: FT link here; data points --

• $56 billion gamble
• on the hot seat: Vicki Hollub
• three years on the job as CEO of OXY
• most ambitious move of her career
• Anadarko: assets around the world, from Texas to Mozambique
• will double the size of Occidental
• will also saddle OXY with debts of around $50 billion
• OXY's shares dropped to a 10-year low
• this is the deal: after 15 years into the shale revolution, investors across the US oil and gas industry want it to start paying off for them
• US acts like a "swing producer": a source of supply that can respond within months
• US shale: buffers Mideast tensions

From the linked article:

To win Anadarko, Occidental had to see off its larger rival Chevron, which took some swift manoeuvring, while the two companies had competing bids on the table. Ms Hollub flew to Omaha, Nebraska for a 90-minute meeting with Warren Buffett on April 28, securing a $10bn investment from Berkshire Hathaway that allowed her to rejig Occidental’s offer to include more cash, avoiding the need to put the deal to a vote of her own shareholders. 

Long, long article. Much more at the link. Archived.

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Screenshots from the FT article linked above on the OXY-Anadarko story: