Occidental Petroleum is in talks with joint venture partner Ecopetrol SA to acquire a 30% stake in CrownRock LP for approximately $3.6 billion, according to regulatory filings. (Source: Shutterstock.com)
Occidental Petroleum is “engaged in discussions” with joint venture partner Ecopetrol for the potential acquisition of a 30% stake in Permian E&P CrownRock LP, according to a July 19 Securities and Exchange Commission filing.
Occidental is acquiring Midland Basin producer CrownRock LP in a $12 billion transaction announced last December.
If a deal between Occidental and Ecopetrol is consummated, Occidental expects Ecopetrol to pay approximately $3.6 billion for the stake in CrownRock, according to Occidental’s SEC filing.
On May 31, Ecopetrol notified Occidental of its intent to acquire an undivided 30% interest in the CrownRock assets, subject to the negotiation of a mutually agreeable deal structure, Occidental disclosed in the regulatory filing.
The discussions stem from the 2019 formation of a Permian-focused JV between Occidental and Ecopetrol that develops Midland Basin oil and gas properties.
“Under that joint venture, each of Occidental Midland Basin and Ecopetrol were given the right, subject to certain conditions, to participate in oil and gas interests acquired by the other and its affiliates in an area of mutual interest,” Occidental said in the filing.
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Occidental’s filing noted that should the companies be unable to reach an agreement by August, Colombia's Ecopetrol can elect for the JV company—Rodeo Midland Basin Joint Venture—to acquire the CrownRock assets.
Under that scenario, a transaction would result in an indirect ownership by Ecopetrol of an undivided 49% interest in the CrownRock assets.
“This option expires in August 2024, and there is no assurance that Ecopetrol can or would exercise such an option,” Occidental said.
Proceeds from any potential deal with Ecopetrol would go toward paying down Occidental’s term loans.
The CrownRock deal will deliver Occidental 1,700 undeveloped locations across the core of the Permian’s Midland Basin. Most of those undrilled locations are expected to breakeven with oil prices ranging between $40/bbl and $60/bbl.
Occidental expects to add approximately 170,000 boe/d through the CrownRock acquisition.
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