Chevron Corp. (CVX) - Get Chevron Corporation Report said Thursday that it will not increase its $33 billion takeover bid for independent drilling group Anadarko Petroleum Corp. (APC) - Get Anadarko Petroleum Corporation Report , and will boost its share repurchase program instead as it collects a $1 billion break-up fee.
Chevron said terms of the deal allow it to collect the break-up fee once Anadarko terminates their previously-brokered agreement in favor of a rival bid from Occidental Petroleum Corp. (OXY) - Get Occidental Petroleum Corporation Report , which it deemed "superior" to Chevron's earlier this week. Chevron said the cash will help it boost its share repurchase program for this year by 25% to $5 billion.
"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," said CEO Michael Wirth. "Our advantaged portfolio is driving robust production and cash flow growth, higher investment returns and lower execution risk. We are well positioned to deliver superior value creation for our shareholders."
Chevron rose 2.2% to $120.11 while Anadarko shares slipped 3% to $73.57.
Occidental Petroleum, which trumped Chevron with a $38 billion bid for Anadarko's stock float last week, fell 6.1% to $56.54.
Anadarko said earlier this week Occidental's move to secure financing for the cash portion of its revised bid, which includes a $59 per share consideration and 0.2934 in Occidental common stock, makes it a "superior proposal" to Chevron's 75% stock and 25% cash deal that values the Houston-based oil group at around $50 billion, including debt.
Berkshire Hathaway (BRK.A) - Get Berkshire Hathaway Inc. Report agreed a $10 billion investment in Occidental last week that gives the Warren Buffett-backed investment group preferred shares paying an 8% dividend.
Chevron had revealed last month that it plans to buy Anadarko for $33 billion in cash and stock, at 65 a share, with Anadarko investors receiving 0.3869 in Chevron stock and and $16.25 in cash for each Anadarko share. The oil major had hoped the deal would have created 42 billion in run-rate synergies in the first year after it closed, while giving it a larger position in the shale-rich Permian Basin, where it has the third largest holdings and Anadarko has the fourth.