Chevron Corp. abandoned its pursuit of Anadarko Petroleum Corp. on Thursday, outmaneuvered by a higher rival bid of $38 billion that included more than three times as much cash.

The decision leaves Occidental Petroleum Corp. as the likely victor in a contest that again proved the allure of U.S. shale.

Anadarko's board had considered Chevron's $33 billion bid superior to Occidental's initial offers, pointing to a signed agreement and joint planning meetings. Chevron's finance chief signaled the company would be able to put more cash into its existing offer.

But that did not happen. The No. 2 U.S. oil producer now stands to receive a $1 billion breakup fee.

"Winning in any environment doesn't mean winning at any cost," Chevron Chief Executive Officer Michael Wirth said.

"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."

Investors have sold off shares of oil companies that increased spending on drilling, punishing them for not using the cash to finance shareholder returns.

They have pressed the industry to use capital discipline, defined as increasing production by 4 percent a year and maintaining a 4 percent dividend with flat spending.

One result of that approach: the value of U.S. oil and gas mergers and acquisitions fell to a 10-year low in the first quarter, driven by investors selling off shares in companies that spent more on drilling than on buybacks and dividends.

The bidding war for Anadarko underscored the value of its prized assets in the lucrative Permian Basin of West Texas and New Mexico. The vast shale field holds oil and gas deposits that can produce supplies for decades using low-cost drilling techniques.

Occidental has said it plans to shed most of Anadarko's non-shale properties in a deal.

The company has made a deal with French oil giant Total SA to take most of Anadarko's international assets, including a liquefied natural gas project in Mozambique estimated to cost up to $25 billion to complete. Total agreed to pay $8.8 billion for the assets once the merger goes ahead.

Chevron declined to revise its offer after Occidental boosted the cash portion of its $76 per share bid. Chevron's $65 per share offer comprised 75 percent stock and 25 percent cash compared with Occidental's revised offer that had a 78/22 cash-stock split.

A 7 percent decline in Chevron's share price had reduced the value of its April 12 offer to $31 billion.

Shares of Occidental fell 6 percent to $56.50 before the bell, while Anadarko shares were down 2.6 percent at $73.90. Chevron shares were up 3 percent at $121.23.