On Monday, Occidental Petroleum unveiled plans to acquire energy producer CrownRock in a significant deal valued at $12 billion, inclusive of existing debt. The acquisition aims to bolster Occidental’s position in the energy sector and enhance its cash flow, marking the company’s first major move since its 2019 acquisition of Anadarko Petroleum, which garnered widespread criticism for its debt implications.
Financing Structure
Occidental detailed the financing structure for the purchase, intending to fund it through a combination of new debt, common equity issuance, and the assumption of CrownRock’s existing debt. The breakdown includes $9.1 billion in new debt, approximately $1.7 billion in common equity, and the absorption of CrownRock’s $1.2 billion debt burden. The deal is slated to conclude in the first quarter of 2024.
Strategic Implications
This cash-and-stock deal positions Occidental to augment its cash flow and gain control of over 94,000 net acres in the Midland Basin, a vital segment of the Permian Basin located in Texas. The move aligns with industry trends where oil and gas producers are urged to expand their portfolios, following notable transactions like Exxon Mobil’s $60 billion deal for Pioneer Natural Resources and Chevron’s $53 billion agreement for Hess in October.
Past Challenges and Current Outlook
Occidental’s acquisition of Anadarko in 2019, while criticized for its debt implications, marked a significant move in the energy sector. With approximately $18.60 billion in debt as of September 30, 2023, Occidental navigated financial challenges, and this new acquisition reflects its ongoing commitment to strategic growth.
Download our app MadbuMax on the Apple App Store for the latest news and financial tools. Interested in getting your finances in order do not forget to check Dr. Paul Etienne’s best-seller book on personal finance. To access more resources, tools, and services please click here. Also, do not forget to follow Dr. Etienne on IG or Twitter.