Chevron share price up 2% after ending Anadarko bid

The oil company's stock is up after ending its bid to buy rival oil corporation Anadarko.

Chevron share price is up after ending its $33 billion bid to purchase Anadarko Petroleum. The oil company is walking away from the deal after rival Occidental stepped up its bid for Anadarko.

Why did Chevron end its bid for Anadarko?

Chevron ended its bid to purchase the oil driller because of the rising costs in its bidding war with Occidental. Chevron chief executive officer(CEO), Michael Wirth, explained why Chevron ended the deal.

‘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 Wirth in a statement.

The termination of the deal is a windfall for Chervron. The oil company will collect a $1 billion termination fee and will increase its share buybacks.

What will happen next with the Anadarko purchase?

Wall Street analysts are cheering the Chevron decision not to buy Anadarko. Pete Speer, senior vice president at Moody’s said that Chevron made a prudent financial decision to end the acquisition.

‘Chevron just demonstrated its commitment to capital discipline and conservative financial policies by declining to enter a bidding war for Anadarko,' said Speer.

Vincent G. Piazza, senior oil industry expert, said that Occidental beating Chevron could cause more problems for the corporation that wins the bidding war.

‘Occidental’s hard work is just beginning after Anadarko accepted its higher -- raised to 78% cash -- offer, while Chevron declined to match that. Although it seems Occidental has won the battle, we believe the higher cash offer blunts the requirement to win shareholder approval, which could alienate investors,’ said Piazza.

Occidental said that it looks forward to acquiring Anadarko.

‘We look forward to signing a merger agreement with Anadarko and realizing value for our stakeholders as soon as possible,’ said Occidental in a statement.

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