Michael and I love evaluating deals. Today is an excellent example of the M&A activity heating up in the oil and gas market. This deal between Occidental and CrownRock has some key takeaways, which we cover.
This was a great exercise in reviewing the deal. While using the tools, I looked at the wells being operated by OXY and noticed their 6 CO2 injection wells along the coast. – Is this why Warren was more interested? I think so; he knows that carbon credits and subsidies for carbon capture will be a multi-trillion-dollar market. The new regulations that the Biden administration is rolling out are also a huge player in this deal. OXY is ahead of the curve.
1: Public buying a private – did they pay too much?
2: What were the formations and leases?
3: PDP and new well locations
4: Why did Warren Buffett buy another $590 million of Occidental?
Buffett Backs Occidental’s Acquisition of CrownRock by Buying More Stock
We used our WellDatabase on the data, making it easy to get both assets and run the type curves. For the financial analysis, we used ComboCurve and came up with a surprising number. Where I need to do some more evaluation is using ComboCarbon and looking at some more advantages that Warren may have known about. We will keep you posted on this update.
Let Michael and I know what you think, and we will be evaluating deals Live at NAPE. Let us know if you have deals you want to recommend for us to review on the ENB Deal Spotlight! Everybody loves a good deal.
Michael’s resource at github for folks wanting to review the data. https://github.com/Sandstone-Group/dealspotlight
Highlights of the Podcast
00:00 – Intro
01:49 – Discussion revolves around evaluating Occidental Petroleum’s (Oxy) deal, covering financial aspects, cost per location, potential overpayment, and considerations like carbon management and water issues.
06:36 – Exploration of Warren Buffett’s investment in Oxy, emphasizing carbon injection wells, the Occidental-Crown Quest combination, free cash flow, increased dividends, and asset evaluation.
10:59 – Highlighting Occidental’s investment in carbon capture, ESG strategies, Warren Buffett’s interest, and the balanced ESG approach. The evaluation process involves well data, diagnostics, and potential reversion to oil and gas.
18:43 – Use of Combo Curve for well data diagnostics, Occidental’s carbon capture credits, ESG strategies, Warren Buffett’s interest, and scenario-building for reserves and financial details. Briefly touches on gas differentials in the Permian.
24:21 – Setting up a financial model for Occidental using Combo Curve, exploring expense models, pricing, gas differentials, revealing a PDP value of $2.77 billion, challenging previous estimates.
30:04 – Building a Sprayberry type curve for Oxy’s wells, emphasizing data-driven decision-making, Combo Curve’s efficiency in analyzing well performance, and providing a comprehensive overview of potential reserves and drilling strategies.
37:06 – Building type curves for Sprayberry and Wolfcamp wells, focusing on careful data analysis, considerations like lateral length, and drilling costs to evaluate reserves and make informed decisions in the oil and gas industry.
45:55 – Analysis of potential overpayment by Oxy for Permian Basin assets, considering drilling costs, type curves, and the need for targeted divestitures to assess the overall value of the deal.
50:23 – Outro
