Occidental has reached an agreement to acquire oil and gas company CrownRock in a cash and stock deal valued at $12bn. 

The deal, which includes CrownRock’s debt, will be funded through $9.1bn of new debt and the issuance of around $1.7bn of Occidental’s common equity.

Occidental said the acquisition of CrownRock, a joint venture between CrownQuest Operating and Lime Rock Partners, bolsters its Permian basin portfolio. 

With the deal, approximately 1,700 undeveloped locations and 170,000 barrels of oil equivalent per day (mboed) of high-margin, lower-decline unconventional output is anticipated to be added to Occidental’s asset portfolio and production capacity, respectively, in 2024.

Houston, Texas-based Occidental noted that CrownRock’s 94,000-plus net acres of premium stacked pay assets and accompanying infrastructure is ideally positioned next to its Midland basin operations.

The majority of the inventory is situated in mainly underdeveloped, clean areas, with much room for upward customisation, the energy company noted.

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On a diluted share basis, Occidental expects higher free cash flow, with $1bn in the first year based on West Texas Intermediate grade’s $70 per barrel.

Occidental president and CEO Vicki Hollub said: “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.

CrownQuest operating CEO Tim Dunn said: “Occidental’s purchase of CrownRock is a multi-win proposition for CrownRock, our employees and customers, and our community.”

The transaction, which marks further consolidation in the US oil and gas industry, is subject to regulatory approvals and customary closing conditions. 

It is expected to close in the first quarter of 2024. 

In October this year, ExxonMobil signed a $59.5bn deal to acquire Pioneer Natural Resources and Chevron brokered a deal to buy Hess for $53bn.

Last week, Australian oil and gas company Woodside and its smaller rival Santos said they were in preliminary talks to merge their operations.