Chevron said it will pay $65 a share to Anadarko shareholders, who will receive 0.3869 a share of Chevron and $16.25 in cash for each Anadarko share.
The total enterprise value of the transaction is $50 billion.
Shares of Anadarko surged Friday following the announcement, jumping 32% to close at $61.78 on the New York Stock Exchange. Shares of Chevron went in the opposite direction, falling 4.94% to close at $119.76.
The deal comes amid a rebound in global oil prices, fuelled in large part by bets among investors that OPEC supply cuts, sanctions on Iran and Venezuela and escalating military tensions in Libya will continue to support markets.
It also points to good times ahead for U.S.-based producers like Chevron, who over the past decade have taken pole position as oil producers and exporters amid the ongoing U.S. shale boom, which has made the U.S. the world's No. 1 oil exporter.
Other oil and energy companies' shares were mixed at the open on Friday. Shares of Exxon (XOM - Get Report) were up slightly at $82, while shares of BP (BP - Get Report) were down a nudge at $44.84. ConocoPhillips (COP - Get Report) stock was a bigger gain, up more than 2% at $67.71.
"This seems a big bet on shale and on oil prices remaining high," said Michael Hewson, an analyst with technology trading platform CMC Markets in London. "That seems a big ask if you think that renewables are set to comprise an increasing bigger part of the energy mix."
The acquisition of Anadarko will enhance Chevron's "already advantaged" upstream portfolio and further strengthen its leading positions in large, attractive shale, deepwater and natural gas resource basins, Chevron said in a statement.
"The combination of Anadarko's premier, high-quality assets with our advantaged portfolio strengthens our leading position in the Permian, builds on our deepwater Gulf of Mexico capabilities and will grow our LNG business," Chevron CEO Michael Wirth said in the statement.
"This transaction will unlock significant value for shareholders, generating anticipated annual run-rate synergies of approximately $2 billion, and will be accretive to free cash flow and earnings one year after close," Wirth added.
Chevron said it will shed $15 billion to $20 billion of assets between 2020 and 2022 after the transaction is completed, and use those proceeds to reduce debt and return cash to shareholders.