The Occidental Petroleum Corp. has just paid $12 billion for one of the Permian Basin’s leading independent oil companies, the CrownRock Corp., and the Texas Independent Producers & Royalty Owners Association says the transaction harbingers more such consolidations.
TIPRO President Ed Longanecker said Tuesday from Austin that the acquisition of CrownRock “is a strategic, accretive and highly complementary addition to Oxy’s portfolio and a testament to the importance of the Permian Basin and its critical role in meeting growing global demand for oil and natural gas.
“We congratulate Occidental, CrownQuest Operating and Lime Rock on this important transaction,” Longanecker said from Austin. “We can also expect further consolidation in West Texas as prominent operators continue to seek premium assets in the Basin to expand their inventory.
“These investments will propel our industry and the leadership of Texas and its significant role in strengthening energy security for our state, country and allies abroad for decades to come.”
Occidental President-CEO Vicki Hollub said Monday from Houston that CrownRock is a joint venture of CrownQuest Operating and Lime Rock Partners and the deal entailed cash, stock and the assumption of CrownRock’s debt.
Hollub said the transaction will deliver increased free cash flow on a diluted share basis including $1 billion in the first year based on $70 per barrel oil, adding that it enhances Oxy’s Permian portfolio with the addition of 170,000 barrels of oil equivalent per day of high-margin, lower-decline unconventional production in 2024 as well as 1,700 undeveloped locations.
“We believe the acquisition of CrownRock’s assets adds to the strongest, most differentiated portfolio that Occidental has ever had,” she said. “We found CrownRock to be a strategic fit that gives us the opportunity to build scale in the Midland Basin and positions 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 we expect to continue Occidental’s exceptional operational and financial results for years to come.”
CrownQuest Operating CEO Tim Dunn said from Midland that the purchase “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,” Dunn said.
Hollub said Oxy had financed the deal with the incurrence of $9.1 billion of new debt, the issuance of $1.7 billion of common equity stock and the assumption of CrownRock’s $1.2 billion of existing debt. The transaction is expected to close in the first quarter of 2024.
Among the 1,700 undeveloped locations, she said, are 1,250 development-ready locations with sub-$60 breakeven oil and 750 with $40 breakeven prospects.
Hollub said in a news release that the majority of the inventory is in largely clean, undeveloped sections “providing ample opportunity for Occidental customization and upside substantive surface acreage of nearly 10,000 acres along with hundreds of miles of gathering and water infrastructure that provide material operational efficiency.
“The acquisition is expected to advance Occidental’s water recycling capability with assets that include four recycling plants,” she said.
