Occidental Petroleum Corp. (NYSE:OXY) is set to acquire Texas-based shale driller CrownRock LP in a cash-and-stock transaction valued at approximately $10.8 billion, marking a significant move in the consolidation trend within North America’s prolific oil basin. The deal is expected to conclude in the first quarter of 2024, pending regulatory approvals, according to a statement released by Occidental on Monday.
To facilitate the acquisition, Occidental has secured $10 billion in committed bridge financing through Bank of America Corp., with plans to replace it with more permanent financing, including term loans and bonds. Occidental also intends to issue about $1.7 billion in new shares to fund the deal, resulting in a 0.7% increase in its stock at 9:37 a.m. in New York.
CrownRock, the third-largest privately held oil producer in the Permian Basin, boasts operations that complement Occidental’s existing assets obtained through its substantial 2019 takeover of Anadarko Petroleum Corp. In securing the Anadarko deal, CEO Vicki Hollub garnered a $10 billion investment from Warren Buffett’s Berkshire Hathaway Inc., which currently stands as Occidental’s largest shareholder. However, Berkshire is not involved in the CrownRock acquisition, as clarified by Occidental CEO Vicki Hollub in a CNBC interview.
As pressure mounts on oil executives to maintain dividends and buybacks amid a maturing North American shale sector and slowing growth, companies are increasingly turning to acquisitions to secure new drilling sites. This move by Occidental follows Exxon Mobil Corp.’s $60 billion agreement to acquire Pioneer Natural Resources Co. and Chevron Corp.’s pending $53 billion takeover of Hess Corp.
The terms of the deal stipulate that Occidental will absorb $1.2 billion in debt held by CrownRock, resulting in an enterprise value of approximately $12 billion. Alongside the acquisition announcement, Occidental disclosed a 22% dividend increase to 22 cents per share and initiated a $4.5 billion to $6 billion divestiture program to alleviate debt.
Bloomberg Intelligence analysts Evan Lee and Vincent G. Piazza view the deal as a significant enhancement to Occidental’s holdings in the Permian Basin, emphasizing the scarcity value of the region’s large acreage blocks. The analysts note that although the $12 billion price, including debt assumption, is on the higher end, the strategic value justifies the cost.
CrownRock, based in Midland, Texas, is backed by private equity firm Lime Rock Partners and produces approximately 170,000 barrels of oil equivalent per day. The company’s joint-lead financial advisers for the deal are Goldman Sachs Group Inc. and TPH&Co, the energy business of Perella Weinberg Partners, with legal representation provided by Vinson & Elkins LLP. Occidental’s financial adviser is BofA Securities, which is also providing financing, and legal counsel is being provided by Latham & Watkins LLP.
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Author Faith Yakubu 
