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Occidental (OXY) to Buy CrownRock in a $12B Cash & Stock Deal
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Occidental Petroleum Corporation (OXY - Free Report) has entered into a purchase agreement to acquire Midland-based oil and gas producer CrownRock L.P., a joint venture between CrownQuest Operating LLC and Lime Rock Partners. The buyout will take place in a cash and stock deal worth approximately $12 billion, including the assumption of CrownRock’s outstanding debt.
Occidental plans to fund the acquisition by taking on $9.1 billion in new debt, issuing about $1.7 billion in common stock and taking over CrownRock's $1.2 billion in outstanding debt. With the fulfillment of normal closing requirements and the acquisition of regulatory clearances, the deal is expected to close in the first quarter of 2024.
Benefits From Acquisition
This agreement enhances Occidental’s premier Permian portfolio with the addition of 170,000 barrels of oil equivalent per day (Mboed) of high-margin, lower-decline unconventional production and about 1,700 undeveloped sites in 2024. On a diluted share basis, higher free cash flow is anticipated, with $1 billion in the first year based on $70 per barrel WTI.
Combined with higher cash flow and proceeds from a new divestiture program of $4.5-$6 billion, Occidental will be able to reduce its debt by at least $4.5 billion over the next 12 months.
The agreement will help Occidental build subsurface understanding and offer operational flexibility and growth opportunities. CrownRock's 94,000 net acres of high-quality stacked pay assets and infrastructure are well-positioned alongside Occidental's legacy Midland Basin operations.
The acquisition of assets, which include four recycling plants, should strengthen OXY’s ability to recycle water. The agreement further increases Occidental’s Permian unconventional sub-$40 breakeven inventory by 33%.
The buyout also supports a 22% increase in OXY’s quarterly dividend rate. This results in a quarterly dividend of 22 cents per share compared with the previous rate of 4 cents. The new dividend is expected to be declared in February 2024.
Acquisition-focused Oil & Gas
In August 2023, Occidental announced that it has entered into a definitive purchase agreement to acquire all the outstanding equity of Carbon Engineering Ltd. for a total cash consideration of approximately $1.1 billion. This acquisition is expected to increase shareholders' value through an improved drive for technology innovation and accelerated direct air capture cost reductions.
In August 2019, Occidental had completed its acquisition of Anadarko Petroleum Corporation in a transaction valued at $55 billion, including the assumption of Anadarko's debt. This acquisition has expanded its operations in the Permian Basin and is accretive to free cash flow.
Along with Occidental, some other oil and gas companies like Chevron Corporation (CVX - Free Report) and ExxonMobil Corporation (XOM - Free Report) are also expanding their operations through acquisitions.
In October 2023, Chevron announced that it will acquire Hess Corporation (HES - Free Report) for $53 billion in an all-stock transaction. The deal, which is expected to close in early 2024, is the second-largest oil and gas acquisition to date, following ExxonMobil's acquisition of Pioneer Natural Resources. The acquisition is a major win for Chevron, as it will give the company access to Hess' high-quality assets in Guyana and the Bakken Formation in North Dakota.
CVX’s long-term (three- to five-year) earnings growth rate is 14.27%. The Zacks Consensus Estimate for its 2023 earnings is pegged at $13.35 per share.
In October 2023, ExxonMobil entered into an agreement to acquire Pioneer Natural Resources in an all-stock transaction worth $59.5 billion. The acquisition will position ExxonMobil as the leading producer in the largest U.S. oilfield, ensuring a decade of cost-effective production. The deal is expected to close in early 2024.
XOM’s long-term earnings growth rate is 3%. It delivered an average earnings surprise of 0.6% in the last four quarters.
Price Performance
In the past three months, shares of Occidental have lost 14% compared with the industry’s 10.5% decline.
Image: Bigstock
Occidental (OXY) to Buy CrownRock in a $12B Cash & Stock Deal
Occidental Petroleum Corporation (OXY - Free Report) has entered into a purchase agreement to acquire Midland-based oil and gas producer CrownRock L.P., a joint venture between CrownQuest Operating LLC and Lime Rock Partners. The buyout will take place in a cash and stock deal worth approximately $12 billion, including the assumption of CrownRock’s outstanding debt.
Occidental plans to fund the acquisition by taking on $9.1 billion in new debt, issuing about $1.7 billion in common stock and taking over CrownRock's $1.2 billion in outstanding debt. With the fulfillment of normal closing requirements and the acquisition of regulatory clearances, the deal is expected to close in the first quarter of 2024.
Benefits From Acquisition
This agreement enhances Occidental’s premier Permian portfolio with the addition of 170,000 barrels of oil equivalent per day (Mboed) of high-margin, lower-decline unconventional production and about 1,700 undeveloped sites in 2024. On a diluted share basis, higher free cash flow is anticipated, with $1 billion in the first year based on $70 per barrel WTI.
Combined with higher cash flow and proceeds from a new divestiture program of $4.5-$6 billion, Occidental will be able to reduce its debt by at least $4.5 billion over the next 12 months.
The agreement will help Occidental build subsurface understanding and offer operational flexibility and growth opportunities. CrownRock's 94,000 net acres of high-quality stacked pay assets and infrastructure are well-positioned alongside Occidental's legacy Midland Basin operations.
The acquisition of assets, which include four recycling plants, should strengthen OXY’s ability to recycle water. The agreement further increases Occidental’s Permian unconventional sub-$40 breakeven inventory by 33%.
The buyout also supports a 22% increase in OXY’s quarterly dividend rate. This results in a quarterly dividend of 22 cents per share compared with the previous rate of 4 cents. The new dividend is expected to be declared in February 2024.
Acquisition-focused Oil & Gas
In August 2023, Occidental announced that it has entered into a definitive purchase agreement to acquire all the outstanding equity of Carbon Engineering Ltd. for a total cash consideration of approximately $1.1 billion. This acquisition is expected to increase shareholders' value through an improved drive for technology innovation and accelerated direct air capture cost reductions.
In August 2019, Occidental had completed its acquisition of Anadarko Petroleum Corporation in a transaction valued at $55 billion, including the assumption of Anadarko's debt. This acquisition has expanded its operations in the Permian Basin and is accretive to free cash flow.
Along with Occidental, some other oil and gas companies like Chevron Corporation (CVX - Free Report) and ExxonMobil Corporation (XOM - Free Report) are also expanding their operations through acquisitions.
In October 2023, Chevron announced that it will acquire Hess Corporation (HES - Free Report) for $53 billion in an all-stock transaction. The deal, which is expected to close in early 2024, is the second-largest oil and gas acquisition to date, following ExxonMobil's acquisition of Pioneer Natural Resources. The acquisition is a major win for Chevron, as it will give the company access to Hess' high-quality assets in Guyana and the Bakken Formation in North Dakota.
CVX’s long-term (three- to five-year) earnings growth rate is 14.27%. The Zacks Consensus Estimate for its 2023 earnings is pegged at $13.35 per share.
In October 2023, ExxonMobil entered into an agreement to acquire Pioneer Natural Resources in an all-stock transaction worth $59.5 billion. The acquisition will position ExxonMobil as the leading producer in the largest U.S. oilfield, ensuring a decade of cost-effective production. The deal is expected to close in early 2024.
XOM’s long-term earnings growth rate is 3%. It delivered an average earnings surprise of 0.6% in the last four quarters.
Price Performance
In the past three months, shares of Occidental have lost 14% compared with the industry’s 10.5% decline.
Image Source: Zacks Investment Research
Zacks Rank
Occidental currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.