By Occidental Petroleum stock experienced a decline on Monday following the company’s announcement that it will acquire energy producer CrownRock in a deal worth $12 billion.
Strengthening Occidental’s Position in the Midland Basin
The acquisition is expected to bolster Occidental’s position in the Midland Basin, a part of the oil-rich Permian Basin located in west Texas and southeastern New Mexico. With this deal, Occidental will gain an additional 170,000 barrels of oil per day in production, further enhancing their portfolio.
According to Occidental’s Chief Executive, Vicki Hollub, “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.”
Funding the Acquisition
To finance the $12 billion acquisition, Occidental plans to purchase $9.1 billion of new debt and issue approximately $1.7 billion of common equity. They will also take on CrownRock’s existing debt of $1.2 billion. The transaction is expected to be completed in the first quarter of 2024.
Quarterly Dividend Increase
In addition to the acquisition news, Occidental also announced a quarterly dividend raise of 4 cents per share, bringing the dividend to 22 cents a share.
Stock Performance and Outlook
Despite the news, Occidental’s stock was down 1% in premarket trading on Monday, settling at $55.91. Year-to-date, the stock has experienced a 10% decline.
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