Chevron gets a hidden gem in the Anadarko deal
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "With all the focus on the oil and gas properties Chevron Most investors have enough views over another gem that the oil giant would get in the deal: Anadarko's 55% stake in Western Midstream (NYSE: WES) . The addition of Western Midstream would increase Chevron midstream business that could improve long-term value created by this combination. "Data Reaction Time =" 12 "> With all the focus on the oil and gas properties Chevron will acquire, most investors will probably look at another gem of the oil giant will receive in the agreement: Anadarkos 55% stake in Western Midstream ] (NYSE: WES) . The access to Western Midstream will increase Chevron's midfield business, which can improve the long-term value created by this combination.
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Shining a spotlight in the midfield
<p class = "canvas-textile text Chevron operates throughout the value chain. As an integrated oil and gas company, Chevron operates throughout the value chain. However, most investors know the company for its upstream production business While many consumers are familiar with downstream retail, some know a lot about the Chevron Pipe Line Company's middle operations, which operate on 3,000 miles of pipelines carrying more than 1.2 million barrels of oil, refined products, and Every day, the company also has enough storage capacity to hold about 2.6 million barrels of product, helping to support Chevron's upstream and downstream operations by moving hydrocarbons from production basins to end-users. "Data Reaction =" 35 "> As An integrated oil and gas company operates Chevron throughout the value chain. Most investors, however, know the business for their upstream production operations, while many consumers are familiar with their downstream retail business. Some know a lot about the central operations of the Chevron Pipe Line Company. This unit operates about 3,000 miles of pipelines that carry more than 1.2 million barrels of oil, refined products and chemicals every day. The company also has enough storage capacity to hold about 2.6 million barrels of products. These resources help support Chevron's upstream and downstream operations by moving hydrocarbons from production basins to end-users.
<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "While Chevron buried his midstream business within his global oil d gas empire, Anadarko has worked hard to highlight the value of these assets, which led the company to form a master limited partnership (MLP) more than a decade ago to help drive growth in the middle. Anadarko steadily dropped its midstream assets to that unit, which unlocked value while providing the company with a cash infusion. MLP also acquired several third-party assets and built new infrastructure to support the growth of Anadarko and other manufacturers. "Chevron buried its midstream business within its global oil and gas empire, and has worked hard to highlight the value of these assets. This led the company to form a championship commitment more than ten years ago to help grow growth. Anadarko smoothed down its midstream assets to that unit, which locked the value while the company was given a cash infusion. MLP also acquired several third party assets and built new infrastructure to support the growth of Anadarko and other manufacturers.
Today, Western Midstream owns interests in more than 12,700 miles of pipelines in Rockies, Texas, New Mexico and Pennsylvania. It also operates natural gas treatment facilities and other midstream assets. Long-term fee-based contracts support the majority of these assets, giving Western Midstream with predictable cash flow. The company returns more than 80% of the money back to investors – including the majority owner Anadarko – through its high-yield distribution.
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More Ways to Win From This Pearl
One of the benefits Chevron will get when assuming Anadarko's 55% stake in Western Midstream is a steady supply of cash flow through MLP's distribution. That the revenue stream should rise as Western Midstream continues to expand its footprint.
Another advantage would be a competitively beneficial midstream business in the Permian Basin to more effectively support Chevron's growth. Western Midstream operates natural gas, crude oil and water collection systems that handle Anadarko's production in the rapidly growing region. These resources help reduce operating costs and help secure market access for the company's production. Due to its majority stake in Western Gas, Anadarko controls infrastructure construction to meet its needs. Chevron can take advantage of this by having Western Midstream build similar assets on its land-based location in the region.
<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt) – sm" type = "text" content = "Chevron can also follow ExxonMobil s (NYSE: XOM) midstream subscription by helping to push long-distance pipelines across the finish line Exxon is working with several midstream companies in the region to expand oil and natural gas pipelines to ease bottlenecks. on the lines, but investing money to build them . " data response time = "66"> Chevron was also able to follow ExxonMobil s (NYSE: XOM) midstream blueprint by helping to squeeze longitudinal pipelines over the target line. Exxon is working with several midstream companies in the region to expand oil and natural gas pipelines to ease bottlenecks. The oil giant not only registers the capacity of the lines, but invests money to help build them.
Finally, Chevron could use Western Midstream as a finance car. On the one hand, it can follow Anadarko's approach and drop its midstream assets to this unit. This will enable the company to maintain control of these assets while releasing the capital to reinvest elsewhere or return to shareholders through the buyback program. Another option would be to sell down some of their interest in the company.
A fine pickup
Chevron's primary purpose of buying Anadarko is to dissolve upstream oil and gas business. However, the deal has a bonus to strengthen its midstream operations. It is an aspect of the transaction that investors should not overlook since Western Midstream will provide more financial and operational benefits. This increases the likelihood that Chevron's bold efforts can bring significant value to its investors over the next few years.
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