Occidental Petroleum stock experienced a decline on Monday following the company’s announcement of its acquisition of energy producer CrownRock. The deal, valued at $12 billion, is expected to boost Occidental’s position in the Midland Basin, adding an impressive 170,000 barrels of oil per day to their production.
Strengthening the Portfolio
According to Occidental CEO Vicki Hollub, the acquisition of CrownRock’s assets will significantly enhance their portfolio. Hollub stated, “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.”
Financing the Acquisition
Occidental plans to fund the deal using various methods. This includes purchasing $9.1 billion of new debt, issuing approximately $1.7 billion of common equity, and assuming CrownRock’s existing debt of $1.2 billion.
Expected Closing and Industry Trends
The acquisition is projected to be finalized in the first quarter of 2024. This move comes as part of a larger trend in the energy sector, with major oil producers making substantial acquisitions to expand their asset portfolios. For instance, Exxon Mobil recently announced its plan to acquire Pioneer Natural Resources for an impressive $64.5 billion, while Chevron confirmed its agreement to purchase Hess for $53 billion.
Dividend Increase and Stock Performance
In addition to the acquisition news, Occidental revealed its decision to raise its quarterly dividend by 4 cents to 22 cents per share. However, despite this positive development, shares of Occidental have experienced a slight decline of 0.9% in premarket trading on Monday, currently priced at $55.99. Overall, the stock has seen a dip of 10% over the course of this year.