Warren Buffett-backed Occidental Petroleum announced Monday it agreed to purchase privately held Permian Basin oil producer, CrownRock. The deal, valued at around $12 billion, would be the company's first major acquisition since 2019. OXY shares advanced.
Occidental Petroleum's bid for CrownRock comes as energy companies look to increase their share of the consolidating Permian Basin pie. At the head of the trend were recent M&A moves by energy giants Exxon Mobil and Chevron.
Occidental plans to finance the purchase by issuing $9.1 billion of new debt along with approximately $1.7 billion in common stock, according to the company's announcement. OXY expects the acquisition to close in the first quarter of 2024.
"We believe the acquisition of CrownRock's assets adds to the strongest and most differentiated portfolio that Occidental has ever had," OXY Chief Executive Vicki Hollub said in a statement.
OXY Stock Performance
The Warren Buffett stock gained more than 1% to 57.07 Monday during market action. Last week, OXY stock has slumped over the past five weeks as U.S. oil prices fell below $70 per barrel.
Occidental Petroleum on Monday also announced plants to increase its quarterly dividend per share by 4 cents to 22 cents. Ahead of the raise, the stock currently yielded 1.3%.
CrownRock is headed by billionaire Timothy Dunn, and backed by the private-equity firm Lime Rock Partners. The company owns more than 94,000 acres in the Permian Basin, mostly in the northern part of the Midland Basin in Texas. CrownRock produces about 170,000 barrels of oil equivalent a day.
As of August, Warren Buffett-backed OXY was the N0. 3 producer in the Permian Basin, according to Enverus data.
Exxon Mobil firmed up its Permian Basin holdings with a $60 billion deal for Pioneer Natural Resources in October. Chevron quickly followed up with its $53 billion purchase of Hess, expanding its ownership in offshore Guyana. Warren Buffett also holds a nearly 6% stake in Chevron.
What Do The Exxon Mobil And Chevron Deals Say About The Oil Industry's Future?
Following that rash of top tier consolidation, smaller energy companies have reportedly sought acquisitions in the Permian Basin. CrownRock — among the last large-scale privately owned producers in the region — has been a key target for energy companies, according to media reports.
Warren Buffett And OXY
Occidental Petroleum's last major purchase was the $38 billion acquisition of Anadarko in 2019. Management was roundly criticized for adding debt to the balance sheet just before the onset of the Covid-19 pandemic.
Warren Buffett's Berkshire Hathaway holds a 25.78% stake in Houston-based Occidental Petroleum. Buffett told shareholders earlier this year he has no intention of taking over the company.
Shares of OXY have booked declines in two straight months, is down 4.5% so far in December and has fallen 10% in 2023. Occidental stock has a 21 Composite Rating out of 99. The Warren Buffett stock also has a 25 Relative Strength Rating and a nine EPS Rating.
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