Occidental Petroleum completes $12bn acquisition of CrownRock

Occidental Petroleum Corporation has successfully completed its high-stakes acquisition of CrownRock, a prominent US-based oil and gas producer, in a landmark $12 billion deal. Announced in December 2023 and now finalised, this transaction represents a significant expansion of Occidental’s operations in the Midland Basin, one of the most prolific oil-producing regions in the United States.

Strategic Expansion and Resource Integration

The acquisition, which includes both cash and stock components, adds over 94,000 net acres to Occidental’s already substantial portfolio. These newly acquired assets encompass premium stacked pay resources and essential supporting infrastructure, strategically positioning Occidental to enhance its existing Midland Basin operations. The integration of CrownRock’s assets will bolster Occidental’s capabilities in extracting and processing high-quality oil, reinforcing its competitive edge in the sector.

Occidental’s President and CEO, Vicki Hollub, highlighted the strategic benefits of the acquisition: “By completing this transaction, Occidental adds assets that we believe make the best portfolio in our company’s history even stronger and more differentiated. We also welcome new team members who will combine with ours to form a high-performing employee base that is focused on safely and efficiently developing low-emission, low-cost energy.”

Occidental Petroleum has completed its $12 billion acquisition of CrownRock, expanding its Midland Basin holdings and enhancing its Permian portfolio.

Impact on Production and Financial Performance

The acquisition is expected to significantly enhance Occidental’s Permian portfolio. By 2024, Occidental anticipates integrating approximately 170 thousand barrels of oil equivalent per day (Mboed) of high-margin, lower-decline unconventional production from CrownRock. This influx of new resources will not only increase production capacity but also contribute to a more stable and predictable revenue stream due to the lower decline rates associated with these assets.

Financially, Occidental forecasts a substantial boost in free cash flow, projecting $1 billion in the first year post-acquisition, assuming a West Texas Intermediate (WTI) price of $70 per barrel. To facilitate the purchase, Occidental has secured $9.1 billion in new debt, approximately $1.7 billion in common equity, and will assume CrownRock’s existing debt of $1.2 billion. This strategic financial structuring underscores Occidental’s commitment to maintaining a robust balance sheet while pursuing growth opportunities.

Additional Developments and Market Dynamics

The completion of the CrownRock acquisition also follows Occidental’s recent sale of certain Delaware Basin assets to Permian Resources for $818 million. This divestiture, finalised in late July, involved nearly 29,500 net acres and approximately 15,000 barrels of oil equivalent per day of production. The sale was part of Occidental’s broader strategy to optimise its asset portfolio and focus on high-value operations.

Occidental had previously been in discussions with Colombian energy company Ecopetrol regarding a potential acquisition of a 30% stake in CrownRock for $3.6 billion. However, these discussions did not result in a deal, highlighting the competitive landscape and the strategic manoeuvring involved in such high-profile transactions.

Looking Ahead

The successful completion of the CrownRock acquisition marks a pivotal moment for Occidental Petroleum, reinforcing its position as a leading player in the oil and gas industry. As Occidental integrates CrownRock’s assets and realises the anticipated benefits, the company is poised to strengthen its operational efficiency, financial performance, and overall market presence.