The shale oil sector is back in the big deal
Recently, Occidental Petroleum announced that it will acquire shale drilling company Crownrock LP for $12 billion (about 86.1 billion yuan).
This is another major acquisition this year, following the ExxonMobil and Chevron acquisitions, and it also indicates that the consolidation of the North American oil industry has accelerated.
Over $10 billion acquisition.
As consolidation in the North American oil industry heats up this year, Occidental Petroleum has joined in.
At present, Occidental Petroleum has agreed to acquire Texas-based shale drilling company Crownrock LP in a cash-plus-** manner.
The terms of the acquisition also require Occidental Petroleum to assume $1.2 billion in debt held by Crownrock, bringing the total value of the transaction to approximately $12 billion.
To materialize the deal, Occidental Petroleum has committed $10 billion in bridge financing through Bank of America, which is expected to be replaced by more permanent financing, including term loans and bonds.
It is understood that Occidental Petroleum has received $10 billion in financial support from its largest shareholder, Berkshire Hathaway.
Moreover, Occidental Petroleum also plans to issue about $1.7 billion in new ** to fund the deal.
Occidental Petroleum said in a Dec. 11 statement that the deal is expected to close in the first quarter of 2024, subject to regulatory approvals.
Occidental Petroleum executives are also under pressure from shareholders for the acquisition. Shareholders are demanding that the company's managers continue to make buybacks and pay dividends as the North American shale oil industry matures and growth slows.
In response to shareholder concerns, Occidental Petroleum said on Monday it would raise its dividend by 22 percent to 22 cents a share and launch a $4.5 billion to $6 billion divestiture program to reduce debt.
It is understood that Crownrock is headquartered in Midland, Texas, and mainly explores oil and gas in the Midland Basin, an important oil-bearing basin in the Permian Basin.
According to Crownrock's operator, Crownquest Operating LLC, Crownrock increased production by 15% in the first six months of 2023, 21% in 2022 and 36% in 2020.
Crownrock has become a large private energy producer in the Permian Basin. It owns 940,000 acres of assets (approximately 380 square kilometers) producing approximately 170,000 barrels of oil equivalent per day.
The deal could add 170,000 barrels of oil equivalent per day to Occidental Petroleum and also provide 1,700 undeveloped sites, of which 1,250 are ready for development.
These sites have break-even points below $60 per barrel, meaning that when WTI*** is above $60, operators can profit from shale oil extraction, and 750 sites have break-even points below $40.
The acquisition of Crownrock will further strengthen Occidental Petroleum's position in the Permian Basin and provide a strong foundation for its future growth.
The buying spree is back on the rise.
North American oil companies have strong cash flows, thanks to the development of shale oil and gas resources and the continued high oil prices last year.
Since the beginning of this year, North American oil companies, which are supported by cash flow, have started a new round of acquisitions.
This was followed by several small acquisitions in North America. In April, Ovintiv announced that it would take 42$7.5 billion acquisition of Encap Investments' portfolio of assets in the Midland Basin, Texas.
In June, Chevron signed an agreement to acquire US shale developer PDC Energy for $6.3 billion**.
In August, Permian Resources announced the acquisition of Earthstone Energy in a $4.5 billion all-** deal.
In October, Civitas Resources announced the $2.1 billion** acquisition of Vencer Energy's oil assets in the Midland Basin, West Texas.
After that, international oil giants ExxonMobil and Chevron officially announced large-scale acquisitions of more than $50 billion.
On October 11, ExxonMobil announced the acquisition of Permian Basin oil and gas producer Pioneer Natural Resources for $64.5 billion.
At the end of October, Chevron also announced a $53 billion acquisition of U.S. oil and gas producer Hess.
Commenting on the continued expansion of the oil and gas business, Chevron CEO Mike Vos said: "The International Energy Agency expects fossil fuel demand to peak in 2030, but we don't see it that way. We will continue to configure our businesses and products to meet global energy needs. ”
Under the dual carbon goal, oil companies remain optimistic about the prospects of the oil and gas business, and have accelerated the pace of integration of the U.S. oil industry.
Chevron CEO Mike Vos has also bluntly said, "Our industry, especially after entering the shale space, should have some consolidation." "Looking at the industry as a whole, there are so many companies involved in the upstream that it's time to 'sort things out'. ”
The new wave of acquisitions will accelerate the consolidation and maturation of the region, bringing more opportunities and returns to investors.
In the critical period of energy transition, fossil fuels, led by oil and natural gas, will continue to play a key role in the medium and long term. This operational flexibility is attractive in a volatile environment.
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