Dec 11 (Reuters) - Occidental Petroleum (OXY.N) said on Monday it would buy Permian basin-focused energy producer CrownRock in a cash-and-stock deal valued at $12 billion including debt, expanding its presence in the largest U.S. oilfield.
Investors are pressing oil and gas producers to expand their inventories following Exxon Mobil's (XOM.N) $60 billion deal for Pioneer Natural Resources (PXD.N) and Chevron's $53 billion agreement for Hess (HES.N) in October.
The CrownRock deal, expected to close in the first quarter of 2024, will give Occidental more than 94,000 net acres in the Midland basin of Texas and is expected to boost its Permian production by 170,000 barrels of oil equivalent per day (boepd) in 2024. Its third-quarter production from the region averaged 588,000 boepd.
"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," said Occidental CEO Vicki Hollub.
Houston-based Occidental will finance the purchase of privately-held oil and gas producer CrownRock with $9.1 billion of new debt, the issuance of about $1.7 billion of common equity and the assumption of CrownRock's $1.2 billion of existing debt.
"The CrownRock assets are generally perceived to be of high quality, but investors are likely to question the merits of adding leverage to the Occidental balance sheet at this point in the cycle," Third Bridge analyst Peter McNally said.
Occidental had about $18.60 billion in debt as of Sept. 30, according to a company filing, and the CrownRock deal would be its first major acquisition since a widely criticized and debt-laden purchase of rival Anadarko Petroleum in 2019.
The company plans to reduce its debt principal by at least $4.5 billion in the next 12 months as it expects $4.5 billion to $6 billion in proceeds from new asset sales.
Hollub said in a CNBC interview on Monday that Warren Buffett's Berkshire Hathaway (BRKa.N), which had helped finance the Anadarko purchase, was not involved in the CrownRock deal.
Occidental will also raise its quarterly dividend by 22% to 22 cents, it said.
The deal "shows the optimism that Vicki and the folks at OXY exude right now about the future of the oil and gas business and the prices they are getting to take advantage of that," said Cole Smead, CEO of Smead Capital Management, which owns about 5.9 million shares of Occidental in its U.S. portfolio.
Reuters first reported in September that CrownRock was preparing to explore a sale that could value it at well over $10 billion including debt.
Reporting by Sourasis Bose in Bengaluru, additional reporting by Seher Dareen; Editing by Devika Syamnath