California Resources expands drilling portfolio with $2.1 billion Aera Energy acquisition

Elizabeth Elkin, Bloomberg February 07, 2024

(Bloomberg) – Oil producer California Resources Corp. will buy Aera Energy LLC in a deal that values the company at about $2.1 billion, including debt, building its drilling portfolio in the Western state.

Photographer: Eric Thayer/Bloomberg

The combined company will be the largest oil and gas company in California by production, according to a statement announcing the all-stock deal. California Resources rose as much as 8.4% on the news, the biggest intraday spike in nearly a year.

The Golden State has fallen out of favor with many international oil giants as the strictest environmental laws in the country make it harder to drill new wells there. Production in California has been falling for years even as other U.S. basins are still enjoying growth. The transaction will add large, producing assets to the driller’s portfolio, with executives eyeing opportunities to eventually increase oil recovery at the combined company.

It’s been a busy several months for dealmakers in the domestic oil and gas industry, which has seen multiple billion-dollar takeovers as companies flush with cash from the post-pandemic run-up in oil prices look to secure new places to drill.

Oil executives have also been facing pressure from investors to maintain buybacks and dividends. California Resources said it expects to increase its quarterly dividend once the deal closes.

The company will issue 21.2 million shares of common stock to the equity owners of Aera, which is owned by entities managed by German asset management group IKAV and Canada Pension Plan Investment Board. Former Aera joint-venture owners Shell Plc and Exxon Mobil Corp. sold their stakes to IKAV in 2022. California Resources, which was spun off from Occidental Petroleum Corp. in late 2014, filed for bankruptcy in 2020 amid low oil prices, emerging from the process later that year.

The transaction is expected to close in the second half of 2024.

Lead image source: California Resources

Connect with World Oil
Connect with World Oil, the upstream industry's most trusted source of forecast data, industry trends, and insights into operational and technological advances.