The biggest and most contentious takeover battle for Anadarko takes a new twist

French energy major, Total, on Sunday announced that it has reached a binding agreement with Occidental to acquire Anadarko assets in Africa. The assets include its liquefied natural gas projects in Mozambique as well as its oil developments in Algeria, Ghana, and South Africa. The assets represent around 1.2 billion barrels of oil equivalent (boe) of 2P reserves, of which 70 percent is gas, plus 2 billion boe of long term natural gas resources in Mozambique.

“These are world-class assets with great upside, and we welcome the opportunity to leverage our expertise in LNG and deepwater developments,” Patrick Pouyanné, chief executive of Total told Financial Times.

Total got interested in the deal hours after Occidental announced that if it acquires Anadarko it will sell off a large number of Anadarko investments across Africa. It expects that this move would allow it to focus its efforts on dominating the oil field straddling Texas and New Mexico that is the biggest and Most productive in the United States.

According to Reuters, despite the capital investment in Mozambique LNG, the acquisition is expected to be free cashflow positive from 2020 even at a Brent price of less than $50 per barrel and to generate more than $1 billion a year of free cashflow from 2025 onwards after start-up of Mozambique LNG.

Total has broken ranks with some of its rivals in recent years and largely ignored the rush to U.S. shale. It is looking to eke out conventional oil and gas resources, seeking projects in sub-Saharan Africa where it has an historically strong presence. Total has the largest proven reserves in Africa among the world’s top oil companies last year.

However, following the agreement with Total, Occidental Petroleum changed the structure of its $55 billion offer to buy Anadarko Petroleum, by adding more cash in an attempt to boost its chances of winning a bidding war against rival oil giant Chevron for the key assets of the US shale producer.

It would be recalled that Anadarko Petroleum Corp. decided to consider Occidental Petroleum in the bid weeks after agreeing to be taken over by Chevron Corp. for about $33 billion. These moves lead to the latest turn in the biggest and most contentious takeover battle for a large oil company in at least 15 years according to The Newyork Times.

If Chevron’s loses its bid to Occidental, Anadarko would be required  to pay the sum of $1 billion as breakup fee which is under the terms of its agreement with Chevron.

Skeptics have said that Occidental does not have the financial muscle to acquire Anadarko like Chevron but Occidental has proven them wrong with its deal with Total and Warren Buffett’s Company Berkshire.

Although it is expected that Chevron will increase the price to more than what Occidental can pay in a few weeks.