Occidental has agreed to acquire US-based Midland Basin oil and gas producer CrownRock in a cash and stock deal worth $12bn, inclusive of the latter’s debt.

Currently, CrownRock is a joint venture between upstream company CrownQuest Operating and private equity investment Lime Rock Partners. The joint venture was formed in 2007.

Occidental plans to fund the acquisition by incurring $9.1bn in new debt, issuing approximately $1.7bn in common equity, and assuming CrownRock’s existing debt of $1.2bn.

CrownQuest Operating CEO Tim Dunn said: “Occidental’s purchase of CrownRock is a multi-win proposition for CrownRock, our employees and customers, and our community.

“We congratulate Occidental and look forward to seeing their historically successful company continue to grow and prosper.”

Occidental expects the acquisition of CrownRock to bolster and enrich its Permian portfolio by incorporating approximately 170 thousand barrels of oil equivalent per day (Mboed) of high-margin, lower-decline unconventional production in 2024.

Additionally, the acquisition brings around 1,700 undeveloped locations.

CrownRock’s holding of over 94,000 net acres, comprising premium stacked pay assets and supporting infrastructure, is strategically aligned to its established Midland Basin operations, said Occidental.

Furthermore, with this acquisition, Occidental anticipates an augmented free cash flow on a diluted share basis, projecting $1bn in the first year, based on a $70 per barrel West Texas Intermediate (WTI).

Occidental president and CEO Vicki Hollub said: “We believe the acquisition of CrownRock’s assets adds to the strongest and most differentiated portfolio that Occidental has ever had.

“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.

“We are excited about combining CrownRock’s high-performing team into our organisation and expect to continue Occidental’s exceptional operational and financial results for years to come.”

The completion of the transaction is anticipated in the first quarter of 2024, contingent upon meeting customary closing conditions and obtaining regulatory approvals.

For the deal, Occidental has enlisted BofA Securities as its financial advisor, with an affiliate thereof offering committed financing. Latham & Watkins is serving as Occidental’s legal advisor.

CrownRock has secured joint-lead financial advisors in Goldman Sachs & Co. and TPH&Co, the energy business of Perella Weinberg Partners. Vinson & Elkins is serving as CrownRock’s legal advisor.