Occidental Petroleum Corp. Friday said it is building its stakes in the Eagle Ford and Bakken shales in two transactions valued at about $3.2 billion.
The Eagle Ford assets in South Texas, which currently produce 200 MMcfe/d, are being purchased from Royal Dutch Shell plc for $1.8 billion. Shell has owned and operated the properties for many years, Occidental said. The assets would be 100% operated by Occidental.
In the Bakken Shale's Three Forks Formation of North Dakota Occidental is acquiring about 180,000 net acres from an undisclosed private seller for $1.4 billion. The assets currently produce about 5,500 boe/d. The net risked reserve exposure is estimated at more than 250 million boe, according to Occidental.
Combined with its current leasehold in the Williston Basin of North Dakota, Occidental said it would have more than 200,000 net acres across the region that would produce more than 6,000 boe/d of production. Output in the Williston Basin is expected to jump "at least 30,000 boe/d" in the next five years.
The U.S. purchases, combined with acquisitions earlier this year, will "more than replace the production" from the $2.45 billion sale of the company's Argentina unit to China Petrochemical Corp., said Occidental CEO Ray Irani. The sale to the Chinese refiner, also known as Sinopec, was announced on Friday as well.
Occidental also unveiled two other changes to its portfolio. The producer is increasing its general partner ownership in oil pipeline operator Plains All-American to 35% from 22%. It also agreed to buy the remaining 50% joint venture interest in the Elk Hills Power Plant in California from Sempra Generation to lower operating costs at its Elk Hills business unit. No financial details were disclosed for the Plains or Sempra deals.
All of the transactions, to be completed with a combination of cash and debt, are expected to be completed before the end of March.
"With these new acquisitions and without Argentina in our asset mix, achieving both our short-term and long-term average annual production growth outlook of 5-8% will be more certain and will generate higher returns," said Irani. "We expect that each of these new acquisitions together with future drilling, potential exploration and consolidation opportunities in these areas, over time, will grow to over 50,000 boe/d."
Based on the "improved free cash flow" outlook, Irani said Occidental's board agreed to increase the common dividend rate by 21% to 46 cents/quarter from 38 cents, effective with the April 15 payment.
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