In a bold move that marks a significant expansion in the energy sector, Occidental Petroleum Corp (OXY) has announced its intent to acquire the Midland-based oil and gas producer CrownRock L.P., a joint venture between CrownQuest Operating LLC and Lime Rock Partners. The deal, which includes the assumption of debt, is valued at approximately $12.0 billion and represents a strategic consolidation of assets that could reshape the competitive landscape of the oil industry.
CrownRock L.P. boasts over 94,000 net acres of prime stacked pay assets in the Midland Basin, and the acquisition promises to substantially boost Occidental’s presence in this area. With the addition of roughly 170 thousand barrels of oil equivalent per day (Mboed) of production projected for 2024, the acquired assets are poised to deliver significant high-margin, lower-decline unconventional production.
Occidental has laid out a financial strategy for the acquisition which entails taking on $9.1 billion of new debt, issuing approximately $1.7 billion of common equity, and absorbing CrownRock’s existing $1.2 billion debt. This strategic financial maneuvering aims to enhance Occidental’s cash flow per diluted share, anticipating an increase of $1 billion in the first year at a $70 per barrel West Texas Intermediate (WTI) benchmark.
The transaction is scheduled to complete in the first quarter of 2024, contingent upon the satisfaction of customary closing conditions. Vicki Hollub, the President and CEO of Occidental, expressed confidence in the acquisition, stating: “We found CrownRock to be a strategic fit, giving us the opportunity to build scale in the Midland Basin and positioning us to drive value creation for our shareholders with immediate free cash flow accretion.”
As of September 2023, Occidental held a robust $649 million in cash and equivalents, showcasing a strong financial position that likely contributed to their ability to pursue such a substantial acquisition. In conjunction with this transaction, Occidental also plans to increase its quarterly common stock dividend per share from $0.18 to $0.22, starting with the February 2024 declaration—a clear signal of the firm’s optimistic outlook on the financial implications of the deal.
In the immediate aftermath of the announcement, Occidental’s shares saw a slight decrease, trading lower by 0.58% at $56.14 in premarket activity. This movement reflects the market’s initial cautious reception of the news, as investors and analysts digest the details of the transaction and its implications for the future of both Occidental and the Midland Basin’s production landscape.
As shareholders and market spectators evaluate this significant development, it’s crucial to consider how the integration of CrownRock’s assets will influence Occidental’s operational efficiency and market positioning. The promise of increased free cash flow and expanded production capacity sets the stage for what could be a transformative period for the company and its stakeholders.
For those following the energy sector, the Occidental-CrownRock deal is a development of noteworthy scale and potential impact. As we observe the unfolding of this corporate play, we invite our readers to stay tuned for updates and to delve deeper into the dynamics of oil industry consolidations. Your thoughts and analyses on such moves are valuable, and we encourage you to share them in the comments or engage further with related readings.
In conclusion, the Occidental acquisition of CrownRock L.P. is a bold stride towards consolidation in the energy sector, with significant potential for reshaping industry competition and creating shareholder value. As the details of the transaction continue to surface, staying informed and involved in the conversation will be key for those interested in the future of energy markets and corporate strategy.
Let’s know about your thoughts in the comments below!
