Occidental Petroleum Corp., Houston, has signed a deal to pay $12.0 billion for CrownRock LP, Midland, Tex., a privately held operator with more than 94,000 acres in the Permian basin. If completed, the acquisition will grow Occidental’s Permian basin production by nearly 30%.
Occidental said the cash-and-stock agreement, which is scheduled to close in first-quarter 2024, will add an estimated 170,000 boe/d to its 2024 production estimates.
CrownRock’s stacked pay assets and supporting infrastructure lie primarily in West Texas’ Glasscock, Howard, Martin, and Midland counties, include about 1,700 undeveloped locations, and are well-positioned alongside Occidental’s legacy Midland basin acreage, the companies said in a statement Dec. 11.
Occidental president and chief executive officer Vicki Hollub and her team expect that CrownRock will add to Occidental’s free cash flow starting in year one (based on West Texas Intermediate price of $70/bbl).
“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,” Hollub said. “We are excited about combining CrownRock’s high-performing team into our organization and expect to continue Occidental’s exceptional operational and financial results for years to come.”
CrownRock’s operations include four water recycling plants and 55 miles of freshwater pipelines. Of the company’s 1,700 undeveloped locations, 1,250 are ready to be developed at WTI breakevens below $60, the companies said. Projected 2024 capital spending on the CrownRock operations is forecast to be $900 million and, as the company has done for several years, use five rigs.
Andrew Dittmar, a senior vice-president at Enverus Intelligence Research, said Occidental’s move—which comes just a few weeks after Exxon Mobil Corp. said it plans to buy Pioneer Natural Resources Inc. (OGJ Online, Oct. 11, 2023) and Chevron Corp. announced a similar deal for Hess Corp. (OGJ Online, Oct. 23, 2023)—is the latest piece of evidence that US shale inventories continue to gain in value.
“At over $50,000 per acre after accounting for the value of existing production, the price paid by Occidental shows valuations have fully reclaimed the highs last seen during a frenzy of buying in 2017-2019 and are inching towards records,” Dittmar said. “What differentiates the CrownRock purchase is that the high price is being paid for a private company and overwhelmingly in cash versus other deals in the same stratosphere that were largely stock-for-stock public company mergers.”
Concurrent with the CrownRock acquisition news, Hollub said Occidental plans to sell $4.5-6 billion worth of domestic assets over the next 18 months and increase quarterly dividend payment by more than 20%.
Shares of Occidental (Ticker: OXY) ticked up on the news: In late-morning trading, stocks were changing hands around $57, up about 1% from Friday’s close. They’re down slightly over the past 6 months, which has trimmed the company’s market capitalization to about $50 billion.
