Addressing Occidental Petroleum’s (OXY) purchase of CrownRock for US$12 billion, Robert Clarke, Vice President of Upstream Research at Wood Mackenzie said, “This transaction cements an absolute banner year in Permian acquisitions and divestments spend. Coupled with other mega 2023 deals like ExxonMobil and Pioneer, it solidifies Permian scale and multi-decade longevity as a ‘must have’ trait for US Majors and Super-Independents. OXY joins ConocoPhillips as the only Permian buyer to spend more than US$10 billion in multiple deals since Permian consolidation really started, with each of OXY’s purchases being focused on one particular basin within the Permian region.”
According to Wood Mackenzie’s analysis, total transaction value in Permian assets has now eclipsed US$100 billion for 2023. The prior peak was US$65 billion in 2019. This most recent deal will create the sixth soon-to-be 1 million boe/d US L48 producer, with others including Chevron, EOG, ExxonMobil, EQT and ConocoPhillips. In the Permian specifically, OXY will become a top three producer behind the majors, pumping more oil and gas pro-forma than Pioneer did at the time of its sale announcement.
“It’s another deal done by a global E&P that anticipates making the acquired Midland asset better via unique technical work,” said Clarke. “Three-mile laterals will be more common going forward and it’ll be easier for a massive buyer like OXY to tie-up large piles of capital in specific projects to unlock full potential of the acreage, including exploration.”
Continued Research Director Ryan Duman, said: “OXY did not need additional Permian inventory, but the company’s position in the Midland Basin was light. The only other two private Permian E&Ps of comparable scale are Endeavor and Mewbourne, and we see sales from those two E&Ps as less likely. Remaining Permian teams looking to monetise are in a sellers’ market.”
Clarke notes that the deal does increase cash flow concentration risk and that US$4.5 billion to US$6 billion of divestments are planned.
“We consider the Gulf of Mexico (GoM) a candidate for disposal in this regard,” said Clarke. “The US GoM is fast becoming non-core in OXY’s US shale-rich portfolio, accounting for only 10% of current production. OXY has an advantage in any GoM sale because it holds assets with 100% ownership. Rockies assets – PRB and DJ farm-downs – are other possible disposals too.”
Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/12122023/occidental-petroleums-purchase-of-crownrock-pushes-annual-permian-acquisitions-to-more-than-us100-billion/