Occidental (NYSE: OXY), a global leader in the oil and gas sector, has made a sensational move in the energy industry by announcing its acquisition of Midland-based oil and gas producer CrownRock L.P., a joint venture of CrownQuest Operating LLC and Lime Rock Partners. The deal, valued at an astonishing $12 billion, includes the assumption of CrownRock’s debt and signifies a major shakeup in the U.S. energy market.

A Billion-Dollar Strategic Move

This acquisition encompasses the takeover of approximately 170 thousand barrels of oil equivalent per day (Mboed) of high-margin, lower-decline unconventional production in 2024, along with approximately 1,700 undeveloped locations. Occidental’s move to acquire CrownRock not only enhances its Permian portfolio but also increases its Permian unconventional sub-$40 breakeven inventory by 33%.

Financial Implications and Growth Prospects

The deal will be financed through $9.1 billion of new debt, issuance of approximately $1.7 billion of common equity, and the assumption of CrownRock’s $1.2 billion existing debt. This strategic acquisition is expected to bolster Occidental’s cash flow, with an anticipated increase of $1 billion in the first year based on $70 per barrel WTI. Additionally, Occidental has announced a plan to increase its quarterly common stock dividend by $0.04 to $0.22 per share, starting February 2024.

Visionary Leadership in Energy

Vicki Hollub, President and CEO of Occidental, emphasized the strategic fit of CrownRock, expressing confidence in the acquisition’s ability to drive value creation for shareholders with immediate free cash flow accretion. She highlighted the alignment of this acquisition with Occidental’s long-term objectives, aimed at redefining the U.S. oil and gas industry.

CrownRock’s Operational Excellence

CrownRock’s well-positioned assets and development-ready inventory are set to high-grade Occidental’s premier Permian Basin portfolio. The acquisition is expected to add high-margin, lower-decline unconventional production of approximately 170 Mboed in 2024. CrownRock’s operating team is renowned for running safe, efficient, and highly productive assets, adding to Occidental’s capabilities.

Market Impact and Future Prospects

This acquisition by Occidental is poised to redefine the U.S. onshore oil and gas sector, enhancing the company’s scale in the Midland Basin. It marks a transformative moment in the industry, signaling Occidental’s commitment to leading the charge in energy production and innovation. The deal is expected to close in the first quarter of 2024, subject to customary closing conditions and regulatory approvals.

  CrownQuest Operating, CrownRock, Lime Rock Partners, Occidental, Permian Basin, USA, Vicki Hollub