Chevron abandoned its pursuit of Anadarko Petroleum on Thursday, outmanoeuvred by a higher rival bid of $38 billion that included more than three times as much cash.
The decision leaves Occidental Petroleum as the likely victor in a contest that again proved the allure of US shale, according to Reuters.
Occidental has said it plans to shed most of Anadarko's non-shale properties in a deal that cements its position in the Permian Basin, the top US shale field.
Chevron, whose shares had gained 25 per cent in the two years prior to its Anadarko offer, declined to revise its offer after Occidental boosted the cash portion of its $76-a-share bid.
The second-biggest US oil producer stands to receive a $1bn break-up fee.
"Winning in any environment doesn't mean winning at any cost," said Chevron chief executive Michael Wirth.
"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."
For Mr Wirth, the focus now shifts to what to do with the company’s $74bn pile of cash and unused shares, according to Bloomberg. One of the key attractions of Anadarko was its presence in the Permian Basin of West Texas and New Mexico. Replete with oil-exploration companies, the region may represent Chevron’s richest hunting ground.
Shares of Occidental fell 4.2 per cent to $57.66 before the bell, Anadarko shares were down 1.8 per cent at $74.51. Chevron shares were up 3.7 per cent at $121.84.
