Today, Occidental announced it entered into a purchase agreement to acquire Midland, Texas-based oil and gas producer CrownRock L.P., a joint venture of CrownQuest Operating LLC and Lime Rock Partners, for cash and stock in a transaction valued at approximately $12 billion, including the assumption of CrownRock’s debt.
The highlights of the deal include:
- Expected to deliver increased free cash flow on a diluted share basis, including $1 billion in the first year based on $70 per barrel WTI
- To complement and enhance Occidental’s premier Permian portfolio with the addition of about 170,000 barrels of oil equivalent per day (Mboed) of high-margin, lower-decline unconventional production in 2024 and about 1,700 undeveloped locations
- Increases Occidental’s Permian unconventional sub-$40 breakeven inventory by about 33%
- CrownRock’s 94,000+ net acres of premium stacked pay assets and supporting infrastructure are well positioned alongside Occidental’s legacy Midland Basin business.
- Increased cash flow and proceeds from a new $4.5 billion to $6 billion divestiture program will enable Occidental to reduce its debt principal by at least $4.5 billion within 12 months and expect to retain its investment grade credit ratings.
- The combined position builds on Occidental’s subsurface understanding and leading well performance while providing operational flexibility and upside.
Occidental also announced a plan to increase the quarterly common stock dividend per share by $0.04 to $0.22, beginning with the February 2024 declaration, consistent with the company’s shareholder return priorities.
Deal Details
The deal’s total consideration is approximately $12 billion. And Occidental plans to finance the purchase with the incurrence of $9.1 billion of new debt, the issuance of approximately $1.7 billion of common equity and the assumption of CrownRock’s $1.2 billion of existing debt. The deal is expected to close in the first quarter of 2024, subject to customary closing conditions and the receipt of regulatory approvals.
Additional Highlights
- 1,700 undeveloped locations, including 1,250 development-ready at sub-$60 WTI breakeven
- 750 locations are sub-$40 WTI breakeven, increasing Occidental’s U.S. Onshore sub-$40 breakeven inventory by 25%
- Greater basin diversification at the top end of the portfolio advances corporate returns and optionality
- The majority of inventory is located in largely clean and undeveloped sections, offering ample opportunity for Occidental customization and upside
- Substantive surface acreage of almost 10,000 acres, along with hundreds of miles of gathering and water infrastructure, provides material operational efficiency
- The deal is expected to advance Occidental’s water recycling capability with assets that include four recycling plants
- Nearly 100% operated position with a high average working interest of 93% amplifies Occidental’s capabilities
- The added position enables Occidental to build upon its deep horizon Barnett well performance leadership, in which new well production was 34% better than basin average
KEY QUOTES:
“We believe the acquisition of CrownRock’s assets adds to the strongest and most differentiated portfolio that Occidental has ever had. 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. 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.”
– Occidental President and Chief Executive Officer Vicki Hollub
“Occidental’s purchase of CrownRock is a multi-win proposition for CrownRock, our employees and customers, and our community. We congratulate Occidental and look forward to seeing their historically successful company continue to grow and prosper.”
– CrownQuest Operating Chief Executive Officer Tim Dunn
