Oil & Gas News

Occidental to Acquire Midland Basin E&P CrownRock for $12B

Occidental Petroleum Corp. agreed to acquire Texas shale driller CrownRock LP in a cash-and-stock deal valued at about $12 billion. Crownquest.

Story By Mitchell Ferman | Midland Reporter-Telegram | Occidental Petroleum Corp. agreed to acquire Texas shale driller CrownRock LP in a cash-and-stock deal valued at about $12 billion as consolidation heats up in North America’s most prolific oil basin.

CrownQuest Operating LLC, which is based in Midland, manages the assets of CrownRock. Tim Dunn runs Crownquest.

The transaction is expected to close in the first quarter of 2024, subject to regulatory approvals, Occidental said Monday in a statement. The company plans to finance the deal by taking on $9.1 billion of new debt and issuing about $1.7 billion of new shares. Occidental dropped as much as 1.5% in pre-market trading in New York.

Dunn offered the following to the Midland Reporter-Telegram about the deal.

“The purchase of CrownRock by Occidental is a multi-win proposition.  Oxy is committed to the Permian Basin and intends to offer employment to all eligible CrownRock employees, and so it is good for our community. I believe the resulting expanded capital base and combined expertise from Occidental’s acquisition of CrownRock will lead to increased capital efficiencies, and enhanced oil production, and will advance American energy independence.

“And, although smaller in scope, CrownQuest remains in business.  This sale includes only CrownRock, our Midland Basin oil and gas partnership with Lime Rock Partners.  The principals of CrownQuest will still have our doors open at our same Claydesta location and will retain our other lines of business that do not involve the operations of Midland Basin properties. We congratulate Occidental and look forward to seeing their historically successful company continue to grow and prosper.“

CrownRock, one of the largest closely held oil producers in the Permian Basin, has operations that complement assets Occidental acquired through its massive 2019 takeover of Anadarko Petroleum Corp. To secure that deal, Chief Executive Officer Vicki Hollub summoned the support of Warren Buffett in a complex arrangement that made him Occidental’s most significant investor.

Occidental’s agreement with CrownRock comes as oil executives face pressure from investors to keep buybacks and dividends flowing even as the North American shale sector matures and growth slows. With many of the best production sites already tapped, companies flush with cash from the post-pandemic run-up in oil prices are increasingly buying rivals to secure new places to drill.

The deal follows Exxon Mobil Corp.’s $60 billion agreement to buy Pioneer Natural Resources Co. and Chevron Corp.’s pending $53 billion takeover of Hess Corp.

In the run-up to the deal, Occidental’s corporate jet flew from Houston, where headquarters are located, to Omaha, Buffett’s home, on Nov. 27 and stayed grounded for about three hours. It was the second time Oxy’s jet visited Omaha in November, having not previously made the trip since May, flight data show.

CrownRock, based in Midland, Texas, is backed by private equity firm Lime Rock Partners and produces about 150,000 barrels of oil equivalent per day, making it the third-largest private producer in the Permian, according to Bloomberg Intelligence.

CrownQuest Operating LLC — which manages the assets of CrownRock — increased production 15% through the first six months of this year, according to industry data provider Enverus. That’s on top of last year’s 21% output growth and the 36% expansion in 2020, according to CrownQuest.

CrownRock is run by Tim Dunn, an influential Republican donor who has spent more than $20 million over the past decade or so to support conservative politicians.

He is poised to be a potent force in the 2024 election, pushing candidates in Texas further to the right in races up and down the ballot. Dunn has also backed Donald Trump before, contributing $300,000 to the Trump Victory joint fundraising committee in 2020. But so far he hasn’t donated to the former president this year.

Occidental’s financial adviser for the CrownRock deal is BofA Securities, an affiliate of which is providing financing. Occidental’s legal adviser is Latham & Watkins LLP.

CrownRock’s joint-lead financial advisers are Goldman Sachs Group Inc. and TPH&Co, the energy business of Perella Weinberg Partners. The company’s legal adviser is Vinson & Elkins LLP.

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