Occidental Petroleum emerges as lead contender to buy CrownRock

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Occidental Petroleum has emerged as the lead contender to buy CrownRock, one of the most sought-after private oil producers in the US shale patch, in a deal valued at about $12.5bn, according to people familiar with the matter.

The offer for CrownRock by Occidental — which is backed by Warren Buffett’s Berkshire Hathaway — has topped those of rival bidders, the people said, indicating that the company is likely to have entered exclusive talks.

The people with direct knowledge of the negotiation said a deal could be reached soon but cautioned that it could still fall apart as no final decision had been made.

If closed, a deal would be a significant coup for Occidental, one of America’s biggest oil producers, and would mark the third significant transaction in the sector in less than two months as large operators vie to snap up dwindling prime drilling acreage.

ExxonMobil announced a $60bn deal to buy leading shale driller Pioneer Natural Resources in mid-October, followed swiftly by Chevron unveiling a $53bn deal for Hess.

News of the talks between Occidental and CrownRock was first reported by the Wall Street Journal. Neither company responded to requests for comment.

Led by Tim Dunn, a prominent conservative donor, CrownRock is one of the leading private operators in the sprawling Permian Basin of Texas and New Mexico, America’s most prolific oilfield.

Alongside rivals Endeavor Energy Resources and Mewbourne Oil, it has long been viewed as a prime target for bigger groups looking to scale up their operations in the oilfield.

Like the others, CrownRock has significantly increased production since 2019. Its private status has left it free to put rigs in the field, while Wall Street has demanded a more cautious approach from publicly listed rivals.

CrownRock is a subsidiary of CrownQuest, which was founded by Dunn in 1996 and operates the group’s wells. It emerged out of a joint venture between CrownQuest and private equity firm Lime Rock in 2007. 

Occidental produced 968,000 barrels of oil equivalent a day in the Permian in August, according to consultancy Rystad Energy, leaving it second only to Pioneer. Absorbing CrownRock’s 226,000 boe/d would solidify its position as the number two player in the basin after Pioneer combines with Exxon.

Occidental’s last major transaction was slammed for being poorly timed after it took on huge debt to buy Anadarko Petroleum for $57bn in 2019, just before the Covid-19 pandemic caused oil prices to plunge.

But the subsequent rebound in prices has allowed the company to pay down debt and driven a surge in its stock price.

In recent years, the company has sought to position itself as a leader in direct air capture, a niche and nascent technology that strips carbon dioxide emissions from the atmosphere.

This month, it entered into a joint venture with asset manager BlackRock to develop a DAC facility.