respect to the offering of Burlington Northern Santa Fe Corporation, a subsidiary of Berkshire Hathaway, 4.150% Debentures due 2048 (aggregate principal amount $750,000,000) in July 2018; as joint bookrunner with respect to the offering of The Kraft Heinz Company, a subsidiary of Berkshire Hathaway, 4.625% Guaranteed Global Notes due 2029, 4.0% Guaranteed Global Notes due 2023, 3.375% Guaranteed Global Notes due 2021 and 4.050% Debentures due 2048 (aggregate principal amount $3,000,000,000) in June 2018; as joint bookrunner with respect to the offering of Burlington Northern Santa Fe Corporation’s 4.050% Debentures due 2048 (aggregate principal amount $750,000,000) in February 2018; and as joint bookrunner with respect to the offering of The Kraft Heinz Company’s Guaranteed Senior Notes due 2022, 2021 and 2019 (aggregate principal amount $1,500,000,000) in June 2018. During the two-year period ended May 9, 2019, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to Berkshire Hathaway and/or its affiliates of approximately $45 million. Goldman Sachs may also in the future provide financial advisory and/or underwriting services to Anadarko, Occidental, Berkshire Hathaway and their respective affiliates and, as applicable, portfolio companies, for which its Investment Banking Division may receive compensation. Affiliates of Goldman Sachs also may have co-invested with Berkshire Hathaway and its affiliates from time to time and may do so in the future.
The Anadarko Board selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the merger. Pursuant to an engagement letter dated February 17, 2019, Anadarko engaged Goldman Sachs to act as its financial advisor in connection with the merger. The engagement letter between Anadarko and Goldman Sachs provides for a fee estimated, based on the information available as of the date of announcement, at approximately $53 million, $2.5 million of which was payable to Goldman Sachs upon announcement of the merger and the remainder of which is contingent upon completion of the merger. In addition, Anadarko agreed to reimburse Goldman Sachs for certain of its expenses, including reasonable attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.
Certain Unaudited Prospective Information
Summary Unaudited Prospective Financial Information Prepared by Anadarko
Anadarko Unaudited Prospective Financial Information
Anadarko does not, as a matter of course, publicly disclose long-term consolidated forecasts as to future performance, earnings or other results given, among other reasons, the uncertainty, unpredictability and subjectivity of the underlying assumptions and estimates. In connection with the Anadarko Board’s consideration of the transaction, Anadarko’s management prepared certain unaudited financial projections regarding Anadarko’s future performance for the years 2019 through 2025 on a standalone basis without giving effect to the merger (the “Anadarko management forecast”), and provided the Anadarko management forecast to Occidental and the Anadarko Board and to Anadarko’s financial advisors for their use in connection with their respective financial analyses (see the sections described above in this proxy statement/prospectus entitled “The Merger—Opinions of Anadarko’s Financial Advisors” beginning on page of this proxy statement/prospectus). The unaudited financial projections were based upon the internal financial model that Anadarko has historically used in connection with strategic planning.
The summaries of these projections are being included in this proxy statement/prospectus to give Anadarko’s stockholders access to non-public information that was provided to Anadarko’s financial advisors in the course of evaluating the proposed merger, and are not intended to influence your decision whether to vote in favor of the merger proposal or any other proposal at the special meeting. The inclusion of this information should not be regarded as an indication that any of Anadarko or its advisors or other representatives or any other recipient of this information considered, or now considers, it to be necessarily predictive of actual future performance or events, or that it should be construed as financial guidance, and such summary projections set forth below should not be relied on as such.
While presented with numeric specificity, the unaudited prospective financial and operating information reflects numerous estimates and assumptions that are inherently uncertain and may be beyond the control of Anadarko, including, among others, Anadarko’s assumptions about energy markets, production and sales volume levels, levels of oil, natural-gas and NGL reserves, operating results, competitive conditions, technology, availability of capital resources, levels of capital expenditures, and other contractual obligations, supply and
demand for, the price of, and the commercialization and transporting of oil, natural gas, NGLs and other products or services and other matters described in the sections entitled “Cautionary Note Regarding Forward-Looking Statements”, “Where You Can Find More Information”, and “Risk Factors”, beginning on pages 29, and 32, respectively. The unaudited prospective financial and operating information reflects both assumptions as to certain business decisions that are subject to change and, in many respects, subjective judgment, and thus is susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. Anadarko can give no assurance that the unaudited prospective financial and operating information and the underlying estimates and assumptions will be realized. In addition, since the unaudited prospective financial and operating information covers multiple years, such information by its nature becomes more speculative with each successive year. This information constitutes “forward-looking statements” and actual results may differ materially and adversely from those projected.
The unaudited prospective financial and operating information was not prepared with a view toward public disclosure, nor was it prepared with a view toward compliance with GAAP, published guidelines of the SEC or the guidelines established by the Public Company Accounting Oversight Board for preparation and presentation of prospective financial information. Neither Anadarko’s independent registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the unaudited prospective financial and operating information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability. The report of the independent registered public accounting firm to Anadarko contained in its Annual Report on Form 10-K for the year ended December 31, 2018, and in the Current Report on Form 8-K filed by Anadarko on May 15, 2019, which is incorporated by reference into this proxy statement/prospectus, relates to historical financial information of Anadarko, and such report does not extend to the projections included below and should not be read to do so.
Furthermore, the unaudited prospective financial and operating information does not take into account any circumstances or events occurring after the date it was prepared. Anadarko can give no assurance that, had the unaudited prospective financial and operating information been prepared as of the date of this proxy statement/prospectus, similar estimates and assumptions would be used. Except as required by applicable securities laws, Anadarko does not intend to, and disclaims any obligation to, make publicly available any update or other revision to the unaudited prospective financial and operating information to reflect circumstances existing since its preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error or to reflect changes in general economic or industry conditions. The unaudited prospective financial and operating information does not take into account all the possible financial and other effects on Anadarko of the merger, the effect on Anadarko of any business or strategic decision or action that has been or will be taken as a result of the merger agreement having been executed, or the effect of any business or strategic decisions or actions that would likely have been taken if the merger agreement had not been executed, but which were instead altered, accelerated, postponed or not taken in anticipation of the merger. Further, the unaudited prospective financial and operating information does not take into account the effect on Anadarko of any possible failure of the merger to occur. None of Anadarko or its affiliates, officers, directors, advisors or other representatives has made, makes or is authorized in the future to make any representation to any Anadarko stockholder or other person regarding Anadarko’s ultimate performance compared to the information contained in the unaudited prospective financial and operating information or to the effect that the forecasted results will be achieved. The inclusion of the unaudited prospective financial and operating information herein should not be deemed an admission or representation by Anadarko or its advisors or any other person that it is viewed as material information of Anadarko, particularly in light of the inherent risks and uncertainties associated with such forecasts.
In light of the foregoing, and considering that the special meeting will be held several months after the unaudited prospective financial and operating information was prepared, as well as the uncertainties inherent in any forecasted information, Anadarko stockholders are cautioned not to place undue reliance on such information, and Anadarko urges all Anadarko stockholders to review Anadarko’s most recent SEC filings for a description of Anadarko’s reported financial results. See “Where You Can Find More Information” beginning on page .
Certain Assumptions
In preparing the prospective financial and operating information for Anadarko described below, the management team of Anadarko used the following commodity price assumptions, which are based on oil and gas strip pricing and Wall Street consensus pricing, each as of February 25, 2019:
Strip pricing |
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2019E |
2020E |
2021E |
2022E |
2023E-2025E |
|||||||||||
Commodity Prices |
|||||||||||||||
Brent oil ($/Bbl) |
$ | 63.07 | $ | 63.31 | $ | 61.84 | $ | 60.87 | $ | 60.61 | |||||
WTI oil ($/MMBtu) |
$ | 55.00 | $ | 56.77 | $ | 55.22 | $ | 54.15 | $ | 53.72 | |||||
Henry Hub gas ($/MMBtu) |
$ | 2.80 | $ | 2.75 | $ | 2.63 | $ | 2.63 | $ | 2.69 | |||||
Wall Street consensus pricing |
|||||||||||||||
2019E |
2020E |
2021E |
2022E |
2023E-2025E |
|||||||||||
Commodity Prices |
|||||||||||||||
Brent oil ($/Bbl) |
$ | 66.34 | $ | 70.00 | $ | 69.59 | $ | 68.57 | $ | 68.57 | |||||
WTI oil ($/MMBtu) |
$ | 59.30 | $ | 63.00 | $ | 64.80 | $ | 64.50 | $ | 64.50 | |||||
Henry Hub gas ($/MMBtu) |
$ | 3.13 | $ | 3.03 | $ | 3.00 | $ | 3.00 | $ | 3.00 | |||||
In addition to the assumptions with respect to commodity prices, the Anadarko unaudited forecasted financial and operating information is based on various other assumptions, including, but not limited to, the following principal assumptions:
| • | DJ Basin capital expenditures declining from $1.3 billion in 2019 to $900 million in 2021, then approximately $1.0 billion per year thereafter ranging from $900 million to $1.3 billion per year; |
| • | Delaware Basin capital expenditures increasing from $1.4 billion in 2019 to $2.2 billion in 2025; |
| • | Gulf of Mexico and international capital expenditures remaining relatively consistent across periods; |
| • | Consistent levels of general and administrative expense; and |
| • | Retirement of all debt maturing within the periods. |
The Anadarko unaudited forecasted financial and operating information also reflects assumptions regarding the continuing nature of ordinary course operations that may be subject to change.
The following table summarizes the Anadarko management forecast as of April 2019 for the fiscal years 2019 through 2025 ($ in millions):
2019 |
2020 |
2021 |
2022 |
2023 |
2024 |
2025 |
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Strip pricing case |
|||||||||||||||||||||
Total Net Production (Mboe/d) |
728 | 774 | 834 | 912 | 973 | 1,086 | 1,198 | ||||||||||||||
Consolidated EBITDAX(1) |
$ | 7,691 | $ | 8,641 | $ | 9,023 | $ | 9,945 | $ | 10,538 | $ | 11,687 | $ | 12,874 | |||||||
Consolidated Capital Expenditures(2) |
$ | 6,042 | $ | 5,781 | $ | 6,048 | $ | 6,366 | $ | 5,806 | $ | 5,371 | $ | 5,260 | |||||||
Unlevered Free Cash Flow(3) |
$ | 49 | $ | 1,951 | $ | 1,965 | $ | 2,492 | $ | 3,646 | $ | 5,076 | $ | 6,227 | |||||||
Wall Street consensus pricing case |
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Total Net Production (Mboe/d) |
728 | 774 | 834 | 912 | 973 | 1,086 | 1,198 | ||||||||||||||
Consolidated EBITDAX(1) |
$ | 8,519 | $ | 9,785 | $ | 10,813 | $ | 12,068 | $ | 12,890 | $ | 14,292 | $ | 15,690 | |||||||
Consolidated Capital Expenditures(2) |
$ | 6,042 | $ | 5,781 | $ | 6,048 | $ | 6,366 | $ | 5,806 | $ | 5,371 | $ | 5,260 | |||||||
| (1) | Consolidated EBITDAX is defined as net income (loss) before income taxes; interest expense; depreciation, depletion and amortization; exploration expense; gains (losses) on divestitures, net; impairments; total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives; and certain items not related to Anadarko’s normal operations. Consolidated EBITDAX is a non-GAAP financial measure as it excludes amounts included in net income (loss), the most directly comparable measure calculated in accordance with GAAP. This measure should not be considered as an alternative to net income (loss) or other measures derived in accordance with GAAP. Consolidated EBITDAX differs from Adjusted EBITDAX historically reported by Anadarko due to its exclusion of amounts of net income attributable to noncontrolling interests. |
| (2) | Consolidated capital expenditures includes the following assumed capital expenditures of Western Midstream Partners, LP: 2019 - $1,157; 2020 - $984; 2021 - $839; 2022 - $1,037; 2023 - $752; 2024 - $625; 2025 - $641. |
