CRC has agreed to acquire Aera Energy in an all-stock transaction valued at approximately $2.1bn.
The amount includes Aera’s net debt and certain other obligations.
Aera is jointly owned by IKAV-managed entities (51%) and the Canada Pension Plan Investment Board (CPP Investments) (49%).
Under the merger terms, CRC will issue 21.2 million shares of its common stock to Aera’s equity owners and refinance Aera’s outstanding debt.
CRC has secured a commitment for a $500m bridge loan facility to aid the transaction’s closing.
The pro forma enterprise value of the merged entity is estimated at $5.6bn, with CRC shareholders owning 77.1%.
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The CRC management team will lead the combined company, which will be headquartered in Long Beach, California, US.
Both IKAV and CPP Investments will nominate one representative each to the CRC Board.
Upon completion, Aera’s owners will hold 22.9% of CRC’s fully diluted shares, receiving 21.2 million shares of CRC common stock.
Aera reported an average production of 76 thousand barrels of oil equivalent per day (boepd) in the third quarter of 2023, with 95% being oil.
Post-merger, CRC’s estimated production for 2024 is projected to be around 150,000boepd, with 76% oil content and proved reserves of approximately 680 million barrels of oil equivalent, 90% of which are proved developed.
The merger is set to bolster CRC’s carbon management business by adding significant surface acreage and rights, as well as new CO₂ pore space, facilitating future carbon capture and sequestration (CCS) development.
CRC will acquire interests in approximately 220,000 net mineral acres, with the majority of the acreage held in mineral fee within field boundaries, and 100,000 fee surface acres.
CRC president and CEO Francisco Leon said: “This strategic transaction will create scale in our operations, generate significant free cash flow, accelerate cash returns to shareholders and expand our energy transition platform.
“We remain committed to reducing emissions and this combination will advance our goal to permanently sequester five million metric tons per year of CO₂ in our underground storage vaults.
“Together, this combination will create an unquestioned leader in energy transition, producing low-carbon-intensity fuels that California needs while accelerating the decarbonisation of the state’s industrial and energy industries.”
The transaction is subject to customary closing conditions, regulatory approvals and CRC shareholder approval, with expected closure in the second half of 2024.
A Shell and ExxonMobil joint venture divested their stake in Aera to IKAV in 2022.