California Resources Corp. (CRC) has closed its $1.13 billion all-stock merger with Aera Energy, a joint venture (JV) created by Shell and Exxon Mobil, creating the state’s largest oil producer, the combined company said.

Including debt, the deal, announced in February, is valued at $2.1 billion.

In February 2023, Shell and Exxon Mobil sold the JV to German asset manager IKAV for $4 billion. The Canada Pension Plan Investment Board (CPP), which subsequently bought a 49% stake in the company, and Oaktree Capital Management also owned equity in the company.

Under the terms of the deal, IKAV, CPP and Oaktree received 21.3 million shares of common stock of CRC, with an aggregate value of $1.13 billion based on the price per share as of market close on June 28.

The pro forma combined net daily production of CRC and Aera averaged 146,000 boe/d (79% oil) in April and May, CRC said in a July 1 press release.

For the second half of 2024, CRC guided production between 140,000 boe/d and 146,000 boe/d, with a 78% oil cut. CRC’s capital spending is projected to be between $170 million and $210 million, the company said.

CRC management expects the deal to more than double 2024 free cash flow and expand cash returns to shareholders. 

“Aera brings a high-return conventional energy business that is expected to significantly boost future cash flow and provide an engine to fund the expansion of our carbon management business,” the company said.

CRC said it expects synergies to total $150 million annually and be realized within 15 months of closing.

Synergies are expected to be realized primarily through lower operating costs, capital efficiencies and administrative expenses, general reductions and the optimization of shared field infrastructure.

Francisco Leon, CRC’s president and CEO, said the transformational deal creates “significant scale and asset durability to meet California’s growing energy needs and expands our leading carbon management platform to help the Golden State meet its ambitious climate goals.”

“We remain confident in our ability to deliver $150 million in annual synergies from the combined businesses within 15 months post close and create meaningful long-term value for our shareholders,” Leon said.

In connection with closing the transaction, CRC increased its borrowing base from $1.2 billion to $1.5 billion, the company said, and increased the aggregate commitment amount from $630 million to $1.1 billion under its revolving credit facility, according to the release.

CRC also said that Bobby Saadati, CEO of IKAV Energy Inc. and James Jackson, managing director, sustainable energies at CPP, were appointed to CRC's board effective July 1.

The combined company will be run by the current CRC executive team and will continue to be headquartered in Long Beach, California.

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