The agreement includes buying all outstanding shares of Anadarko, which is based in The Woodlands, valued at $33 billion.
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The deal, announced Friday, arrives with U.S. crude prices up 40 percent this year.
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"This transaction builds strength on strength for Chevron," said Chevron's Chairman and CEO Michael Wirth. "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."
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According to the details of the agreement, Chevron will issue about 200 million shares of stock and pay approximately $8 billion in cash upon closing.
Chevron's headquarters will remain in San Ramon, California.
The companies put the enterprise value of the deal at $50 billion.
The deal is expected to close in the second half of the year.
See more stories on Chevron.
The Associated Press contributed to this report.