Occidental joins the ranks of rumored would-be CrownRock buyers

The M&A rumor mill is at it again, and this time it’s Occidental Petroleum reportedly in talks to acquire private equity-backed Permian Basin operator CrownRock LP. A story from The Wall Street Journal about the potential deal cited unnamed people familiar who also told the newspaper that the JV of private equity firm Lime Rock Partners and Timothy Dunn’s CrownQuest Operating LLC could be valued at about $10 billion.

The price tag is roughly in line with that previously reported by Reuters, which broke the story of a potential CrownRock sale in mid-September. Subsequent reporting has named ConocoPhillips, Diamondback Energy, Devon Energy, Marathon Oil and Continental Resources as considering bids for the private company.

The Permian M&A market has been very active this year, with nine transactions announced over $1 billion, the largest being ExxonMobil’s purchase of Pioneer Natural Resources at $64.5 billion. PE-backed firms have been popular targets with Tap Rock Resources, Hibernia Energy III, Advance Energy Partners, Novo Oil & Gas, Forge Energy II and Percussion Petroleum Operating II all sold to larger public operators. CrownRock and Endeavor Energy Resources are thought to be two of the last sizable PE-backed operators on the market.

Formed in 2007, CrownRock owns 94,000 net acres primarily in the northern Midland Basin, as well as 105,000 net acres on the Spade Ranch property in Mitchell County, Texas, which is part of the Eastern Shelf, according to its website. During 2022, the company commenced drilling on 142 wells targeting the Wolfcamp and Spraberry, of which 53 were turned to sales. In addition, 69 wells drilled or completed in 2021 were brought online in 2022. The company spent $951.6 million to drill, complete and equip wells in 2022 and produced an average 135,890 boe/d. According to Enverus Foundations data, CrownQuest is currently operating six rigs: two each in Howard and Midland counties and one each in Glasscock and Martin counties.

Occidental has not a made major acquisition since it paid $57 billion to acquire Anadarko Petroleum in August 2019. The company holds 2.8 million net acres in the Permian and produced 588,000 boe/d from the basin in Q3. It is spending $2.7 billion on Permian capex this year, averaging 24 rigs, and bringing online 380-410 wells.

Answering a question about the M&A environment on a Nov. 8 earnings call, Oxy CEO Vicki Hollub said, “the good thing is we don’t have to do acquisitions. Therefore, while our business development group keeps up with and is aware of what’s happening in our industry, we feel no need to have to do anything or be a part of it.”