Occidental (NYSE:OXY) announced on Monday it will acquire CrownRock and its significant Permian basin assets in a deal valued at around $12B.
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The deal was first reported towards the end of November and, if it goes through, will see Occidental significantly boost its onshore portfolio and generate immediate free cash flow accretion.
Occidental (OXY) will incur $9.1B of new debt, issue $1.7B of common equity and take on CrownRock’s $1.2B of existing debt for the acquisition. The transaction is expected to close in Q1 2024.
The deal will immediately deliver increased free cash flow, including $1B in the first year based on $70 per barrel WTI. It will add around 170 Mboed of oil production in 2024, along with around 1,700 undeveloped locations. CrownRock owns ~86K net acres in the northern part of the Midland Basin in Texas.
The increased cash flow and a $4.5-$6B divestment plan will help Occidental (OXY) bring down debt by at least $4.5B within 12 months. The firm also plans to increase the quarterly dividend by 22% to $0.22 per share beginning with the February 2024 declaration.
“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,” said Occidental President and Chief Executive Officer Vicki Hollub.
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