Occidental’s Strategic Expansion with $10.8 Billion CrownRock Acquisition

Quiver Quantitative – Occidental Petroleum (NYSE:) has made a significant stride in the energy sector with its agreement to acquire Texas-based shale driller CrownRock for approximately $10.8 billion. This deal, Occidental’s largest since its 2019 acquisition of Anadarko Petroleum (NYSE:), is a strategic move to consolidate its presence in the Permian Basin, North America’s most prolific oil field. Scheduled for completion in the first quarter of 2024, the acquisition is pending regulatory approvals. Occidental has secured a $10 billion bridge financing from Bank of America (BAC) and plans to issue $1.7 billion in new shares to facilitate the deal.

CrownRock, a major player in the Permian Basin and backed by private equity firm Lime Rock Partners, stands as the third largest privately held oil producer in the region. Its operations are expected to complement the assets Occidental previously acquired from Anadarko Petroleum. The acquisition comes at a time when oil executives are under pressure to maintain investor dividends and buybacks, even as opportunities for growth in the North American shale sector are slowing. With the industry’s prime production sites largely tapped, companies are increasingly seeking mergers and acquisitions to secure new drilling locations.

Market Overview:
-Occidental to issue new shares and utilize bridge financing to fund the deal.
-CrownRock’s operations complement Occidental’s existing Permian assets.
-Occidental increases dividend and outlines divestiture program to reduce debt.

Key Points:
-Deal comes amid pressure on oil companies to maintain investor rewards.
-Consolidation trend follows Exxon (NYSE:) Mobil-Pioneer and Chevron-Hess acquisitions.
-CrownRock’s production increased significantly in recent years.
-Deal leader Tim Dunn is a prominent Republican donor and Trump supporter.
-Occidental’s close ties to Berkshire Hathaway (NYSE:) noted with CEO visit to Buffett’s home.

Looking Ahead:
-Completion of the deal is expected in Q1 2024.
-Occidental seeks to reduce debt through divestitures.
-Permian Basin consolidation is likely to continue.
-Investors will be watching for potential impact on oil production and prices.

As Occidental moves forward with this significant acquisition, facilitated by advisors from BofA Securities and Latham & Watkin for Occidental, and Goldman Sachs Group (NYSE:), TPH&Co, and Vinson & Elkins for CrownRock, the deal marks a pivotal moment in the energy industry.

This article was originally published on Quiver Quantitative