California Resources (CRC.N) made a significant stride in its growth trajectory by announcing its acquisition of Aera Energy, valued at $2.1 billion, including debt. This move aims to more than double CRC’s production capacity, positioning the company as a formidable player in the U.S. oil and gas sector.
The combined entity will boast ownership interests in five of the largest oil fields in California, a strategic advantage expected to drive substantial production growth. California Resources projects its 2024 production to average 150,000 barrels of oil equivalent per day, significantly enhancing its operational scale and market presence.
Moreover, the acquisition underscores CRC’s commitment to environmental stewardship and sustainability. By unlocking significant carbon capture and storage (CCS) potential, the company plans to add approximately 54 million metric tonnes of CCS pore space in the San Joaquin basin, aligning with global efforts to mitigate climate change.
Mark Viviano, managing partner and lead portfolio manager at Kimmeridge, emphasised the strategic importance of the deal, stating that it enhances scale across both the upstream and carbon management businesses, with the potential for material synergies. He noted CRC’s unique position to capitalise on an energy transition towards net-zero oil production, highlighting the company’s forward-thinking approach.
Aera Energy, currently owned by German asset manager IKAV and the Canada Pension Plan Investment Board, represents a valuable addition to CRC’s portfolio. The acquisition is deemed financially favourable, with brokerage Roth MKM’s analysts recognising California Resources’ prudent investment in the assets.
In addition to its growth prospects, the deal is expected to deliver immediate financial benefits. CRC anticipates that the acquisition will contribute positively to certain financial metrics in the current year, reflecting a 45% improvement in its operating cash flow per share. Furthermore, CRC’s board has authorised a 23% increase in share buyback, underscoring its confidence in the company’s prospects.
While California has witnessed a steady decline in oil production over the past four decades, CRC’s acquisition of Aera Energy signals a strategic pivot towards growth and sustainability. The deal represents a bold step forward for CRC as it navigates the evolving energy landscape and positions itself for long-term success.
