Occidental Petroleum on Monday joined the consolidation wave that is sweeping the U.S. oil industry by offering to buy CrownRock, a privately owned oil producer, for $12 billion.
The proposal comes on the heels of recent acquisition announcements by Exxon Mobil and Chevron, the two largest U.S. oil companies. Occidental will add 94,000 acres of shale fields rich in oil and gas, most of which have not yet been developed.
Based in Houston, Occidental is one of the biggest producers in the Permian Basin, the nation’s most prolific oil field straddling Texas and New Mexico. Occidental said that the acquisition of CrownRock, which is also in Houston, could allow it to increase its daily oil and gas production by roughly 14 percent.
“We found CrownRock to be a strategic fit,” said Vicki Hollub, Occidental’s chief executive.
Not that long ago, the Permian Basin was in deep decline. Over several decades, many big oil companies trimmed their positions or left the field. By the early 2000s, private companies like CrownRock had picked up much of what Big Oil had left behind.
The advent of horizontal drilling and fracking through shale rock helped revive interest and production in the Permian. That forced many big oil companies to reverse course and return to the field over the last two decades largely by buying smaller producers.
CrownRock, controlled by the Texas billionaire Timothy Dunn with the backing of Lime Rock Partners, a private equity firm, is one of the few private oil companies with large positions in valuable shale still operating in the Permian.
The consolidation of the industry has created concern among environmentalists who fear it will mean an increase in fossil fuel production. “As oil companies consolidate power, it will become even harder to advance climate policies and hold the industry accountable for its role in the climate emergency,” said Cassidy DiPaola, spokesman for Fossil Free Media.
Occidental has expressed concern about climate change, and has tried to pivot some of its business toward cleaner fuels. It has been investing in technology to remove carbon dioxide from the atmosphere and bury it underground. It also plans to use the captured carbon to extract more oil and make products like concrete.
Occidental has been on the hunt to expand in shale fields since at least 2019, when it spent $38 billion to buy Anadarko, outbidding Chevron. That deal turned disastrous when oil prices later plunged, especially during the pandemic. Weighed down by debt, Occidental struggled to survive but has since recovered strongly.
Occidental’s proposed acquisition of CrownRock comes just two months after Exxon Mobil announced it would spend $60 billion to purchase Pioneer Natural Resources. Also in October, Chevron said it would acquire Hess for $53 billion. Both deals are expected to be completed next year. Chevron’s deal is giving the company a position in offshore deepwater fields in the South American country Guyana. Exxon’s acquisition will make it the largest producer in the Permian Basin.
The latest deal comes at an uncertain time. Oil prices have declined by roughly 20 percent since late September as traders have grown concerned that global demand is weak and major oil producers are pumping out too much oil.
Occidental, however, appears not to be too worried about prices. The company also said on Monday that it was raising its dividend to 22 cents, from 18 cents a share.
