Occidental (NYSE: OXY) today announced it entered into a
purchase agreement to acquire Midland-based oil and gas producer
CrownRock L.P., a joint venture of CrownQuest Operating LLC and
Lime Rock Partners, for cash and stock in a transaction valued at
approximately $12.0 billion, including the assumption of
CrownRock’s debt.
Highlights include:
- Expected to deliver increased free cash flow on a diluted share
basis, including $1 billion in the first year based on $70 per
barrel WTI
- Complements and enhances Occidental’s premier Permian portfolio
with the addition of approximately 170 thousand barrels of oil
equivalent per day (Mboed) of high-margin, lower-decline
unconventional production in 2024, as well as approximately 1,700
undeveloped locations
- Increases Occidental’s Permian unconventional sub-$40 breakeven
inventory by 33%
- CrownRock’s over 94,000 net acres of premium stacked pay assets
and supporting infrastructure are well positioned alongside
Occidental’s legacy Midland Basin business
- Increased cash flow, along with proceeds from a new $4.5-$6.0
billion divestiture program, will enable Occidental to reduce its
debt principal by at least $4.5 billion within 12 months and expect
to retain its investment grade credit ratings
- Combined position builds upon Occidental’s subsurface
understanding and leading well performance, while providing
operational flexibility and upside
Occidental also announced its intention to increase the
quarterly common stock dividend per share by $0.04 to $0.22,
beginning with the February 2024 declaration, consistent with the
company’s shareholder return priorities.
“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. “We are excited about combining CrownRock’s
high-performing team into our organization and expect to continue
Occidental’s exceptional operational and financial results for
years to come.”
“Occidental’s purchase of CrownRock is a multi-win proposition
for CrownRock, our employees and customers, and our community,”
said CrownQuest Operating Chief Executive Officer Tim Dunn. “We
congratulate Occidental and look forward to seeing their
historically successful company continue to grow and prosper.”
Transaction Details
The transaction’s total consideration is approximately $12.0
billion. Occidental intends to finance the purchase with the
incurrence of $9.1 billion of new debt, the issuance of
approximately $1.7 billion of common equity and the assumption of
CrownRock’s $1.2 billion of existing debt. The transaction is
expected to close in the first quarter of 2024, subject to
customary closing conditions and the receipt of regulatory
approvals.
Additional Highlights
- 1,700 undeveloped locations, including 1,250 development-ready
at sub-$60 WTI breakeven
- 750 locations are sub-$40 WTI breakeven, increasing
Occidental’s U.S. Onshore sub-$40 breakeven inventory by 25%
- Greater basin diversification at top end of portfolio advances
corporate returns and optionality
- Well-understood and rich subsurface is adjacent to some of the
most prolific wells in the basin
- Majority of inventory is located in largely clean and
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, provides
material operational efficiency
- Acquisition expected to advance Occidental’s water recycling
capability with assets that include four recycling plants
- Nearly 100% operated position with high average working
interest of 93% amplifies Occidental’s capabilities
- Added position enables Occidental to build upon its deep
horizon Barnett well performance leadership, in which new well
production was 34% better than basin average
Conference Call / Webcast
Occidental will hold a conference call to discuss the
acquisition at 11 a.m. Eastern/10 a.m. Central on December 11,
2023. The conference call may be accessed by calling 1-866-871-6512
(international callers dial 1-412-317-5417) or via webcast at
oxy.com/investors. Participants can register for the conference
call at https://dpregister.com/sreg/10184704/fb22d65000.
Additional details are available in a presentation on the
investor section on www.oxy.com.
Advisors
Occidental’s financial advisor is BofA Securities and an
affiliate thereof is providing committed financing. Occidental’s
legal advisor is Latham & Watkins LLP.
CrownRock’s joint-lead financial advisors are Goldman Sachs
& Co. LLC and TPH&Co, the energy business of Perella
Weinberg Partners. CrownRock’s legal advisor is Vinson & Elkins
LLP.
About Occidental
Occidental is an international energy company with assets
primarily in the United States, the Middle East and North Africa.
We are one of the largest oil and gas producers in the U.S.,
including a leading producer in the Permian and DJ basins, and
offshore Gulf of Mexico. Our midstream and marketing segment
provides flow assurance and maximizes the value of our oil and gas.
Our chemical subsidiary OxyChem manufactures the building blocks
for life-enhancing products. Our Oxy Low Carbon Ventures subsidiary
is advancing leading-edge technologies and business solutions that
economically grow our business while reducing emissions. We are
committed to using our global leadership in carbon management to
advance a lower-carbon world. Visit oxy.com for more
information.
About CrownQuest Operating
CrownQuest Operating is a privately owned company based in
Midland, TX. It has managed the CrownRock LP partnership since its
inception in 2007. CrownQuest and its predecessors have operated in
the Permian Basin since their founding in 1996. The company
continues its other business interests, primarily in land and
minerals management. Visit crownquest.com for more
information.
About Lime Rock Partners
Since its inception in 1998, Lime Rock Management has raised
over $10.0 billion in private equity funds and affiliated
co-investment vehicles for investment in the energy industry
through three strategies: Lime Rock Partners, investors of growth
capital in E&P and oilfield service companies; Lime Rock
Resources, acquirers and operators of oil and gas properties in the
United States; and Lime Rock New Energy, investors of growth
capital in new energy companies in North America. With over 100
portfolio company investments made over the last 25 years, Lime
Rock Partners is a creative investment partner in building
differentiated oil and gas businesses, side by side, with
entrepreneurs every day. Visit lrpartners.com for more
information.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995, including but not limited
to statements about Occidental’s expectations, beliefs, plans or
forecasts. Future declarations of quarterly dividends and the
establishment of future record and payment dates are at the
discretion of Occidental’s Board of Directors and will be based on
a number of factors, including Occidental's future financial
performance and other investment priorities. All statements other
than statements of historical fact are “forward-looking statements”
for purposes of federal and state securities laws, including, but
not limited to: any projections of revenue or other financial items
or future financial position or sources of financing; any
statements of the plans, strategies and objectives of management
for future operations or business strategy; any statements
regarding future economic conditions or performance; any statements
of belief; and any statements of assumptions underlying any of the
foregoing. Words such as “estimate,” “project,” “will,” “should,”
“could,” “may,” “anticipate,” “plan,” “intend,” “believe,”
“expect,” “target,” "commit," "advance," or similar expressions
that convey the prospective nature of events or outcomes are
generally indicative of forward-looking statements. You should not
place undue reliance on these forward-looking statements, which
speak only as of the date of this press release unless an earlier
date is specified. Unless legally required, Occidental does not
undertake any obligation to update, modify or withdraw any
forward-looking statements as a result of new information, future
events or otherwise.
Forward-looking statements involve estimates, expectations,
projections, goals, forecasts, assumptions, risks and
uncertainties. Actual outcomes or results may differ from
anticipated results, sometimes materially. Factors that could cause
actual results to differ include, but are not limited to: the
ultimate outcome of the acquisition of CrownRock by Occidental;
Occidental’s ability to consummate the proposed transaction with
CrownRock; the conditions to the completion of the proposed
transaction; that the regulatory approvals required for the
proposed transaction may not be obtained on the terms expected or
on the anticipated schedule or at all; Occidental’s ability to
finance the proposed transaction with CrownRock; Occidental’s
indebtedness, including the indebtedness Occidental expects to
incur and/or assume in connection with the proposed transaction
with CrownRock and the need to generate sufficient cash flows to
service and repay such debt; Occidental’s ability to meet
expectations regarding the timing, completion and accounting and
tax treatments of the transactions contemplated by the definitive
agreement with CrownRock; the possibility that Occidental may be
unable to achieve expected free cash flow accretion and other
anticipated benefits within the expected time-frames or at all and
to successfully integrate CrownRock’s operations with those of
Occidental; that such integration may be more difficult,
time-consuming or costly than expected; that operating costs,
customer loss and business disruption (including, without
limitation, difficulties in maintaining relationships with
employees, customers or suppliers) may be greater than expected
following the proposed transaction or the public announcement of
the proposed transaction; the retention of certain key employees of
CrownRock; potential litigation relating to the potential
transaction that could be instituted against Occidental or its
directors; rating agency actions and Occidental’s ability to access
short- and long-term debt markets on a timely and affordable basis;
Occidental’s ability to complete the contemplated divestiture
program within the expected time-frames or at all; and general
economic conditions that are less favorable than expected.
Additional information concerning these and other factors that
may cause Occidental’s results of operations and financial position
to differ from expectations can be found in Occidental’s filings
with the SEC, including Occidental’s 2022 Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K.
Contacts
Media |
Investors |
Eric Moses |
Neil Backhouse |
713-497-2017 |
713-366-5604 |
eric_moses@oxy.com |
neil_backhouse@oxy.com |
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