Chevron Corp. agreed Friday to buy one of the largest independents in the world, Anadarko Petroleum Corp., in a $33 billion deal that expands its armada in the U.S. onshore, deepwater Gulf of Mexico (GOM) and in the liquefied natural gas (LNG) export business.

The total enterprise value of the stock-and-cash transaction, including net debt, is estimated at $50 billion.

“This transaction builds strength on strength for Chevron,” CEO Michael Wirth said. “The combination of Anadarko’s premier, high-quality assets with our advantaged portfolio strengthens our leading position in the Permian, builds on our deepwater Gulf of Mexico capabilities and will grow our LNG business. It creates attractive growth opportunities in areas that play to Chevron’s operational strengths and underscores our commitment to short-cycle, higher-return investments.”

Chevron currently ranks as the world’s 10th largest oil and gas producer, while Anadarko ranks as the 41st largest. Once combined, Chevron would climb into seventh place, according to Rystad Energy. The new entity would jump ahead of Royal Dutch Shell plc and BP plc, trailing only ExxonMobil Corp. and the five biggest national oil companies.

The Chevron chief emphasized the Anadarko merger was not “just a shale deal,” but rather would unlock opportunities around the world, creating “significant value for shareholders, generating anticipated annual run-rate synergies of approximately $2 billion, and will be accretive to free cash flow and earnings one year after close.”

Chevron eclipsed Wall Street earnings expectations for 4Q2018, with Australian gas exports from Gorgon and Wheatstone, along with surging Permian production, lifting output by 12% year/year to 3.1 million boe/d. For the full year, oil and gas production climbed about 7% from 2017 to 2.93 million boe/d.

For the LNG portfolio, Chevron would gain a substantial resource base in the Anadarko-led Mozambique export project, which is expected to be sanctioned soon. Chevron already has stakes in two active export projects in Australia, Wheatstone and Gorgon.

Chevron is also advancing a project in offshore Kitimat in British Columbia with Australia’s Woodside Energy Ltd. Earlier this month in an application to the National Energy Board, the partners doubled the size and intended lifespan of KM LNG, requesting a 40-year authorization to load tankers at Kitimat with up to 2.7 Bcf/d. The project’s first license granted a 20-year term for 1.3 Bcf/d.

In addition to the myriad exploration and production (E&P) opportunities, Anadarko’s midstream unit Western Midstream Partners LP has assets that “are well aligned with the combined companies’ upstream positions, which should further enhance their economics and execution capabilities,” Wirth said.

Before Friday’s merger news, Chevron had forecast it would surpass its production milestones in 2019 with another 4-7% increase, based on $60/bbl Brent oil prices.

Anadarko is one of the biggest employers in the Houston area with long and deep ties to the area. Initially formed in 1959 following a huge natural gas discovery in the Anadarko Basin, the operator has since discovered a plethora of oil and gas across the world.

At the end of 2018, Anadarko, which is now headquartered north of Houston in The Woodlands, had 1.47 billion boe of proved reserves, making it one of the world’s largest E&Ps. During 4Q2018, production averaged about 701,000 boe/d, versus 637,000 boe/d a year earlier.

Anadarko CEO Al Walker said the combination would “form a stronger and better company with world-class assets, people and opportunities. I have tremendous respect for Mike and his leadership team and believe Chevron’s strategy, scale and operational capabilities will further accelerate the value of Anadarko’s assets.”

In the Lower 48, the combination would create a 75-mile-wide corridor across the most attractive acreage in the Permian’s Delaware sub-basin. Anadarko is also the biggest operator in Colorado’s Denver-Julesburg Basin.

The merger would enhance Chevron’s already huge position in the deepwater GOM, where it has numerous projects and another potential likely to be sanctioned this year, Anchor, according to Wood Mackenzie.

Anadarko is considered the largest independent working in the GOM’s deepwater, with 10 operated facilities. GOM sales volumes averaged 142,000 boe/d in 4Q2018, including 120,000 b/d of oil.

Anadarko was also the second highest bidder in last month’s GOM auction held by the Interior Department’s Bureau of Ocean Energy Management. Chevron had made eight high bids in the auction for $12 million.

Besides its bulging U.S. portfolio and LNG projects, Anadarko has myriad overseas investments in Algeria, Australia, Colombia, Guyana and Peru.

The transaction is expected to achieve run-rate cost synergies of $1 billion before tax and capital spending reductions of $1 billion within a year of closing at $60/bbl Brent oil prices.

Once completed, Chevron plans to divest up to $20 billion of assets between 2020 and 2022 to reduce debt. As a result of higher expected free cash flow, Chevron also plans once the deal is closed to increase its share repurchase rate to $5 billion/year from $4 billion.

The acquisition is structured as 75% stock and 25% cash, providing an overall value estimated at $65/share, based on Chevron’s closing price on Thursday (April 11). Once completed, Chevron would issue around 200 million shares of stock and pay about $8 billion in cash. It also is assuming $15 billion net debt. Total enterprise value of $50 billion includes assuming the net debt and book value of noncontrolling interest.

The transaction has been approved by each board and is set to close before the end of the year. The acquisition still needs Anadarko shareholder approval and is subject to regulatory approvals.

Wirth would continue to lead the combination as CEO and chairman. Chevron also plans to retain its headquarters in San Ramon, CA.

Credit Suisse Securities (USA) LLC is acting as financial adviser to Chevron, while Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal adviser to Chevron. Evercore and Goldman Sachs & Co. LLC are acting as financial advisers to Anadarko, and its legal advisers are Wachtell, Lipton, Rosen & Katz and Vinson & Elkins LLP.