Occidental Petroleum (NYSE: OXY), the oil giant, will acquire Midland-based oil and gas producer CrownRock–a joint venture of CrownQuest Operating and Lime Rock Partners–for cash and stock in a transaction valued at around $12 billion. This transaction also includes the assumption of CrownRock’s debt.
Occidental President and CEO Vicki Hollub commented, “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.”
OXY’s acquisition of CrownRock is expected to deliver “increased free cash flow on a diluted share basis, including $1 billion in the first year based on $70 per barrel West Texas Intermediate (WTI).” This acquisition is projected to add around 170 thousand barrels of oil equivalent per day (Mboed) of high-margin, lower-decline unconventional production next year, as well as around 1,700 undeveloped locations in the Permian basin.
More importantly, Occident announced that it intends to increase its quarterly dividend per share by 22% to $0.22 beginning in February next year. The acquisition is expected to close in the first quarter of next year.
This acquisition was expected to be in the works for quite some time now.
Is OXY stock a Buy?
Analysts remain cautiously optimistic about OXY stock with a Moderate Buy consensus rating based on six Buys, seven Holds, and one Sell. In the past year, OXY stock has declined by more than 10%, and the average OXY price target of $71.31 implies an upside potential of 26.3% at current levels.
