Anadarko to buy Kerr-McGee, Western Gas Resources

Alex Cohen Jun 23, 2006

KAI RYSSDAL: The energy industry had a big two for one today. Houston based Anadarko Petroleum’s going to buy two companies. Kerr McGee and Western Gas Resources. The deal’s more evidence there’s money to burn in oil and gas with prices at near-records. And not even in refining it. Just pulling it out of the ground. Anadarko will become the country’s biggest independent energy exploration company. More now from Alex Cohen.

ALEX COHEN: Anadarko will shell out $16.4 billion for Oklahoma City-based Kerr-McGee and $4.7 billion for Denver-based Western Gas. Anadarko will also assume debt for the two companies. This big-ticket acquisition is a sign of the times:

FADEL GHAIT: The deals are getting more pricey because there are fewer and fewer companies left.

That’s Fadel Ghait, an analyst with Oppenheimer and Co. He notes that Anadarko will be taking on $29 billion of debt to finance the deal — a move some investors might find risky. Anadarko’s shares lost 6.3 percent this morning after the acquisition was announced.

But, given the current lack of oil and gas resources overseas, Anadarko’s domestic buying spree may have been a wise one, says Barbara Shook of the Energy Intelligence Group.

BARBARA SHOOK: With prices as high as they are, companies are being kept out of the resource-rich countries that would rather depend on their national oil and gas operators to keep . . . I guess you could say keep all the rent at home rather than sharing it with outside investors.

The deal must be approved by Kerr-McGee shareholders and regulators, but the companies involved say they expect to close it by the end of the third quarter.

I’m Alex Cohen for Marketplace.

As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.

Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.

Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.