In a major move within the oil and gas industry, California Resources Corp. has announced the acquisition of Aera Energy LLC for a whopping $2.1 billion, including debt. This deal will significantly expand California Resources’ drilling portfolio, making it the largest company by production in the state.
Francisco Leon, president and CEO of CRC commented on the deal by saying: “This strategic transaction will create scale in our operations, generate significant free cash flow, accelerate cash returns to shareholders and expand our energy transition platform.”
Leon also focused attention on the company’s commitment to reducing emissions and how “this combination will advance our goal to permanently sequester 5 million metric tons per year of CO2 in our underground storage vaults.”
Erik Bartsch, Aera’s president and CEO, said the two companies have “decades of experience and track records that will serve as a foundation for a strong combination. We are committed to continuing to deliver the energy Californians need today and working to deploy carbon capture at-scale.”
The all-stock deal has caused a surge in California Resources‘ stock price, with the company seeing an 8.4% increase on the day of the announcement. The increased production capacity and strengthened portfolio will further solidify California Resources’ position as a key player in the energy market.
The purchase represents a major achievement for the company, which was separated from Occidental Petroleum Corp. at the end of 2014 and underwent a challenging period, filing for bankruptcy in 2020 amid low oil prices.
However, California Resources managed to emerge from the process later that year, and the acquisition of Aera Energy LLC is a clear indicator of its recovery and growth trajectory.
The deal will involve the issuance of 21.2 million shares of common stock to the equity owners of Aera, including German asset management group IKAV and Canada Pension Plan Investment Board, who currently own the company.
With the post-pandemic surge in oil prices, companies in the sector are eager to expand their operations and secure new opportunities for drilling. This deal is just one of many billion-dollar takeovers that have been making headlines in recent months as oil and gas companies seek to capitalize on their increased cash reserves.
This expansion is expected to bring about meaningful strategic and financial benefits for California Resources as it continues to evolve and thrive in the ever-changing energy landscape.
The transaction, which is anticipated to close in the second half of 2024, will undoubtedly impact the future of oil and gas production and distribution in the region.