Following the same strategy of Chevron acquiring Hess and ExxonMobil’s grab of Pioneer Natural Resources, Occidental plans to continue the momentum in the merger and acquisition world with the recent announcement of the intent to purchase CrownRock for $10 billion. This maneuver would only fortify Occidental’s footprint as a top energy producer in the West Texas area of the Permian Basin.
According to a news report published in the Wall Street Journal, negotiations between the two players are underway. They carry significant weight as no other bidders have emerged from the shadows. Encompassing over 80,000 net acres in the Permian’s Midland Basin area, CrownRock draws its leadership from Timothy Dunn and financial backing from Lime Rock Partners, a private equity firm. Dunn founded the company as a subsidiary of CrownQuest in 2007. As a private entity, it has balked at Wall Street’s cautious approach and dispatched drilling rigs to the field as it saw fit.
The CrownRock story resembles that of the typical underdog. The company, rival to Endeavor Energy Resources and Mewbourne Oil, started small by securing leases before the shale boom. Through strategic maneuvering of assets, Dunn established the company as an icon in the basin that most looked upon with envious eyes. As a result, CrownRock had more to offer than Occidental could stand, so discussions were initiated.
Boasting $53 billion worth, Occidental used its market share to purchase Anadarko for $38 billion in $ 2019. Although deemed a valuable acquisition, Occidental was left with significant debt that drew interest from Carl Icahn, an activist investor. The market plunge, compliments of the pandemic, choreographed a large share of the debt.
According to Rystad Energy, Occidental takes second to only Pioneer with its 968,000 barrels of oil equivalent a day in the Permian’s August production tally. That second-place seat would be fortified with the addition of CrownRock’s 226,000 boe/d after Exxon takes ownership of Pioneer.
With evidence of the pandemic still lingering, the industry has witnessed a rebound in pricing. As a result, Occidental and other companies have been able to concentrate funds on reducing debt and increasing stock pricing. It has additionally pushed forward with investing in air capture to remove carbon dioxide emissions from the atmosphere. Earlier this month, Occidental partnered with BlackRock to develop a DAC facility.
With the recent news of one industry mogul buying another, a new oilfield continues to evolve. Smarter spending with an enhanced focus on streamlining has pushed the old wildcatter theory of continuous drilling for more profits. Now, economics drive business strategy, and for many to boost production, instead of building, they buy it. As a result, the industry will likely witness additional mergers and acquisitions in 2024, with smaller companies shoring up balance sheets and drawing attention to the bigger fish populating the pond.
Nick Vaccaro is a freelance writer and photographer. In addition to providing technical writing services, he is an HSE consultant in the oil and gas industry with twelve years of experience. Vaccaro also contributes to SHALE Oil and Gas Business Magazine, American Oil and Gas Investor, Oil and Gas Investor, Energies Magazine and Louisiana Sportsman Magazine. He has a BA in photojournalism from Loyola University and resides in the New Orleans area. Vaccaro can be reached at 985-966-0957 or [email protected].
