Oxy, Ecopetrol form Midland basin joint venture

Occidental Petroleum Corp. and Ecopetrol SA have formed a joint venture to develop 97,000 net acres of Oxy’s Midland basin properties in the Texas counties of Midland, Martin, and Howard.

Occidental Petroleum Corp. and Ecopetrol SA have formed a joint venture to develop 97,000 net acres of Oxy’s Midland basin properties in the Texas counties of Midland, Martin, and Howard.

Ecopetrol will pay $750 million cash plus $750 million of carried capital in exchange for 49% interest in the new venture. Oxy will operate the combine with 51%. During the carry period, Ecopetrol will pay 75% of Oxy’s share of capital expenditures. Oxy will retain production and cash flow from its existing operations in the Midland basin.

The joint venture allows Oxy to accelerate its development plans in the basin, where it currently has minimal activity. The deal enables Ecopetrol to book some 160 million boe of proved undeveloped reserves at closing while strengthening shale development capabilities that could be utilized in Colombia, said Felipe Bayon, Ecopetrol chief executive officer and president, in a press statement.

The combine will progressively increase production until 2027, Ecopetrol said.

To develop the JV, Ecopetrol incorporated two new companies, Ecopetrol Permian LLC and Ecopetrol USA Inc., and converted Ecopetrol America Inc. into Ecopetrol America LLC, which will continue to focus on US Gulf of Mexico operations.

The transaction, expected to close in this year’s fourth quarter, is subject to US approvals.

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