February 25, 2024

Pavlo Gonchar | LightRocket | Getty Images

Occidental Petroleum has agreed to buy CrownRock, a major privately held energy producer that operates in the Permian Basin, for $12 billion.

The deal is latest in a spate of consolidation in the U.S .energy sector, particularly in the Permian, the largest oil-producing region in the U.S.

CrownRock is developing a 100,000 acre position in the Midland Basin, a portion of the Permian that spans 20 counties in western Texas. The Midland Basin produced 15% of U.S. crude in 2020, according to the U.S. Energy Information Agency.

Occidental will issue $9.1 billion in debt and about $1.7 billion in common stock to finance the transaction.

Separately, Occidental said it is raising its quarterly dividend to 22 cents a share from 18 cents a share beginning next year.

Led by Texas billionaire Timothy Dunn, CrownRock produced 140,000 of barrels per day of oil equivalent in the third quarter of 2022, up from 66,000 barrels per day in 2019, according to a January report from Fitch Ratings.

CrownRock is one of the last major private producers in the Permian alongside Endeavor Resources. The company is backed by the Houston-based private equity firm Lime Rock Partners.

Occidental is the ninth largest energy company in the U.S. with a market capitalization of $49.7 billion. Warren Buffett’s Berkshire Hathaway owns about a 26% stake in the company. Occidental’s stock is down 10% this year.

The company’s last major acquisition was its purchase of Anadarko Petroleum for $55 billion in 2019. Occidental’s purchase of Anadarko sparked a bitter dispute with activist investor Carl Icahn, who sold the remainder of his stake in the company in 2022.

Occidental’s purchase of CrownRock is the third major deal in the energy sector in less than two months.

Exxon Mobil announced in October that it is acquiring Pioneer Natural Resources for about $60 billion. Pioneer is the largest producer in the Midland Basin, according to Enverus.

Weeks later, Chevron announced it had agreed to purchase Hess for $53 billion.

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