Ecopetrol Pulls Out Of Deal to Buy Occidental’s CrownRock Assets

Occidental Petroleum (NYSE:OXY) has disclosed that Colombia’s Ecopetrol S.A. (NYSE:EC) has pulled out of a deal to buy a 30% stake in Occidental’s CrownRock assets. Last year, Occidental announced a deal to acquire CrownRock and its significant Permian Basin assets in a cash and stock deal valued at ~$12B. In May, Occidental reaffirmed plans to sell $4.5B-$6B of CrownRock assets within 18 months of closing the purchase, set to be completed by August. Occidental hoped to use part of the proceeds from the Ecopetrol deal to pay down debt, which had ballooned to  $18B at the end of Q1.

According to Occidental, "Ecopetrol will have an option to elect for the Rodeo Midland Basin Joint Venture to acquire the CrownRock assets, resulting in an indirect ownership by Ecopetrol of an undivided 49% interest in the CrownRock assets," if it fails to strike a deal with Ecopetrol. Previously, Bloomberg reported that Occidental was marketing the sale of up to $5B of blue-chip bonds to finance its acquisition of CrownRock.

Last week, Reuters reported that Occidental Petroleum is close to an agreement to sell assets in the Barilla Draw region of Texas to Permian Resources (NYSE:PR) for about $1 billion. Citing people familiar with the matter, Reuters reported that a deal may be announced in the coming weeks if talks don't fall apart. However, a rival bidder for the Permian Basin assets could still emerge. Reuters first reported in early May that Occidental was exploring a sale of part of its operations in the Permian Basin that could fetch more than $1 billion. 

On its part, Ecopetrol  CEO Ricardo Roa revealed the company is considering buying gas assets in Colombia from Canadian operator Canacol (OTCQX:CNNEF) due to ongoing concerns that Colombia will lose gas self-sufficiency in five years. Despite being one of the highest dividend-paying Oil & Gas stocks, Bank Of America recently downgraded EC shares, noting that Ecopetrol has struggled to replenish reserves, with the current reserve replenishment ratio at 48% and a lower average reserve life of 7.8 years.

By Alex Kimani for Oilprice.com

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