Occidental is the latest oil company to buy a smaller producer

Occidental Petroleum joined the wave of consolidation sweeping the U.S. oil industry on Monday by making an offer to buy CrownRock, a private oil producer, for $12 billion.

The proposal follows recent announcements of acquisitions by Exxon Mobil and Chevron, the two largest US oil companies. Occidental will add 34,000 hectares of shale fields rich in oil and gas, most of which have not yet been developed.

Occidental, based in Houston, is one of the largest producers in the Permian Basin, the nation’s most productive oil field, which straddles Texas and New Mexico. Occidental said the acquisition of CrownRock, which is also based in Houston, could allow the company to increase its daily oil and gas production by about 14 percent.

“We felt CrownRock was a strategic fit,” said Vicki Hollub, CEO of Occidental.

Not long ago, the Permian Basin was in deep decline. Over decades, many major oil companies have trimmed their positions or exited the field. By the early 2000s, private companies like CrownRock had picked up much of what Big Oil had left behind.

The advent of horizontal drilling and fracking through shale rock helped revive interest and production in the Permian. That forced many major oil companies to change course over the past two decades and return to the field, largely by buying smaller producers.

CrownRock, controlled by Texas billionaire Timothy Dunn with the backing of Lime Rock Partners, a private equity firm, is one of the few private oil companies with large positions in valuable shale still operating in the Permian.

The industry’s consolidation has raised concerns among environmentalists, who fear it will mean an increase in fossil fuel production. “As oil companies consolidate their power, it will become even more difficult to advance climate policy and hold the industry accountable for its role in the climate crisis,” said Cassidy DiPaola, spokesperson for Fossil Free Media.

Occidental has expressed concerns about climate change and has tried to focus some of its business on cleaner fuels. It has invested in technology to remove carbon dioxide from the atmosphere and bury it underground. It also plans to use the captured carbon to extract more oil and make products such as concrete.

Occidental has been on the hunt to expand in shale fields since 2019, when it spent $38 billion to buy Anadarko, outbidding Chevron. That deal turned disastrous when oil prices later plummeted, especially during the pandemic. Burdened by debt, Occidental struggled to survive but has since recovered strongly.

Occidental’s proposed acquisition of CrownRock comes just two months after Exxon Mobil announced it would spend $60 billion to purchase Pioneer Natural Resources. Also in October, Chevron said it would acquire Hess for $53 billion. Both deals are expected to close next year. Chevron’s deal gives the company a position in offshore deepwater fields in the South American country of Guyana. The acquisition of Exxon makes it the largest producer in the Permian Basin.

The latest deal comes at an uncertain time. Oil prices have fallen roughly 20 percent since late September as traders worry about weak global demand and major oil producers pumping too much oil.

However, Occidental doesn’t seem too concerned about prices. The company also said Monday it would increase its dividend from 18 cents per share to 22 cents.