Chevron Corp. (CVX.N) is abandoning its $33 billion offer for oil driller Anadarko Petroleum Corp. (CVX.N), the culmination of a month-long bidding war in which Occidental Petroleum Corp. prevailed over a rival five times its size.

The most ambitious foray of Chevron Chief Executive Officer Mike Wirth’s tenure ended on Thursday after the world’s third-largest oil explorer by market value elected not to sweeten an offer that fell out of favor with Anadarko directors. Chevron said it will collect a US$1 billion termination fee and plans to increase its share buybacks by 25 per cent.

"Winning in any environment doesn’t mean winning at any cost. Cost and capital discipline always matter, and we will not dilute our returns or erode value for our shareholders for the sake of doing a deal,” Wirth said.

Chevron’s departure leaves Occidental free to proceed with its US$38 billion takeover of Anadarko that will double the acquirer’s daily output to the equivalent of more than 1.3 million barrels, on par with OPEC members Angola or Libya. The outcome also vindicates Occidental CEO Vicki Hollub, whose opening appeals to Anadarko were pilloried by prominent investors and analysts as an overreach.

Chevron is entitled to a US$1 billion breakup fee under the terms of the April 12 agreement that was initially embraced by Anadarko’s board.

More Cash

Since the bidding war erupted publicly last month, Occidental’s smaller size and financial resources relative to Chevron handicapped its pursuit of Anadarko. Houston-based Occidental’s stock was seen as a less-robust currency than Chevron’s, a defect Hollub cured by lining up support from Warren Buffett and Total SA, and upping the cash portion of her bid to 78 percent from 50 percent.

On May 6, Anadarko dropped its resistance to Hollub’s entreaties and blessed her offer as “superior” to Chevron’s.

For Chevron’s Wirth, the focus now shifts to what to do with the company’s $74 billion pile of cash and unused shares. One of the key attractions of Anadarko was its presence in the Permian Basin of West Texas and New Mexico, which has evolved into the world’s most prolific oil field. Replete with oil-exploration companies, the region may represent Chevron’s richest hunting ground.

Chevron rose 3.8 percent to US$122 a share at 8:28 a.m. in New York in pre-market trading. Occidental fell 4.1 per cent, while Anadarko dropped 2.4 per cent.