Occidental Petroleum Corp. (OXY) experienced a 1.5% decline in premarket trading on Monday after announcing its acquisition of privately held Permian Basin oil and gas producer CrownRock L.P. for $12 billion.
The Deal
CrownRock L.P. is a joint venture of CrownQuest Operating LLC and Lime Rock Partners, and it reportedly received bids from multiple oil and gas companies before agreeing to the deal with Occidental. The acquisition is expected to strengthen Occidental’s position in the energy sector and provide significant financial benefits.
Financial Outlook
Occidental anticipates that the acquisition will contribute approximately $1 billion in cash flow during the first year, based on an assumption of $70 per barrel oil. This expected increase in cash flow reflects the promising prospects of CrownRock’s oil and gas assets.
Dividend Increase
As part of the deal, Occidental plans to raise its quarterly common stock dividend by 4 cents per share, increasing it to 22 cents per share commencing with the February 2024 declaration. This decision is testimony to Occidental’s confidence in the future growth and profitability resulting from the acquisition.
Financing Details
To finance the acquisition, Occidental will raise $9.1 billion through new debt and issue approximately $1.7 billion of common equity. Additionally, Occidental will assume $1.2 billion of existing CrownRock debt. This financing strategy aligns with Occidental’s aim to secure robust funding while managing its leverage effectively.
Closing of the Deal
The acquisition is subject to customary regulatory approvals and is expected to be finalized in the first quarter of 2024. Once completed, Occidental will be able to fully capitalize on the synergies and opportunities provided by its strategic union with CrownRock.
