UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On August 1, 2024, Occidental Petroleum Corporation (“Occidental”) consummated the purchase of CrownRock, L.P. (“CrownRock”) for total consideration of approximately $12.4 billion (“the acquisition”) consisting of approximately $9.4 billion of cash consideration (inclusive of and subject to certain working capital and other customary purchase price adjustments), approximately 29.6 million shares of common stock of Occidental, and the assumption of $1.2 billion of existing debt of CrownRock and its subsidiaries. Concurrent with the acquisition closing, Occidental issued approximately $9.7 billion aggregate principal amount of new debt.
The unaudited pro forma condensed combined financial statements (the “pro forma financial statements”) presented below have been prepared from the respective historical consolidated financial statements of Occidental and CrownRock and have been adjusted to reflect (i) the completion of the acquisition, (ii) Occidental’s incurrence of approximately $9.7 billion aggregate principal amount of new indebtedness, (iii) the issuance of approximately 29.6 million shares of Occidental’s common stock and (iv) the redemption of CrownRock’s unsecured senior notes due in 2025 (the “CrownRock 2025 notes”). The unaudited pro forma condensed combined balance sheet (the “pro forma balance sheet”) is presented as if the transactions had been completed on June 30, 2024. The unaudited pro forma combined statements of operations (the “pro forma statements of operations”) for the year ended December 31, 2023, and for the six months ended June 30, 2024, are presented as if the transactions had been completed on January 1, 2023. The amounts related to discontinued operations in Occidental’s Quarterly Report on Form 10-Q for the period ended June 30, 2024 have been excluded from the pro forma statements of operations.
The pro forma financial statements have been prepared from, and should be read in conjunction with, (i) the unaudited consolidated financial statements of Occidental contained in its Quarterly Report on Form 10-Q for the period ended June 30, 2024, (ii) the unaudited condensed consolidated financial statements of CrownRock for the six months ended June 30, 2024 included as Exhibit 99.1 to the Current Report on Form 8-K which these pro forma financial statements are filed with as Exhibit 99.2, (iii) the audited consolidated financial statements of Occidental contained in its Annual Report on Form 10-K for the year ended December 31, 2023 and (iv) the audited consolidated financial statements of CrownRock for the year ended December 31, 2023, included as Exhibit 99.1 to Occidental’s Current Report on Form 8-K filed on July 19, 2024. Certain of CrownRock’s historical amounts have been reclassified to conform to Occidental’s financial statement presentation.
The pro forma financial statements have been prepared to reflect adjustments to Occidental’s historical consolidated financial information that are (i) directly attributable to the acquisition, (ii) factually supportable and (iii) with respect to the pro forma statements of operations only, expected to have a continuing impact on Occidental’s results.
The pro forma financial statements reflect the following pro forma adjustments, based on available information and certain assumptions that Occidental believes are reasonable:
• the acquisition of CrownRock under the acquisition method of accounting;
• the assumption of liabilities for expenses related to the transactions;
• the incurrence by Occidental of $9.7 billion of new indebtedness, consisting of (i) $2.0 billion in term loans with a maturity of 364 days and $2.7 billion in term loans with a maturity of two years borrowed under a term loan agreement with Bank of America, N.A., as administrative agent, and certain financial institutions party thereto, as lenders, and (ii) $5.0 billion in senior unsecured long-term debt issued in lieu of borrowings pursuant to, and termination of, a 364-day senior unsecured bridge loan facility;
•the redemption of the CrownRock 2025 notes, totaling approximately $868 million; and
•the issuance of approximately 29.6 million shares of Occidental’s common stock
The pro forma financial statements do not include the realization of cost savings from operating efficiencies, revenue synergies or other integration costs expected to result from the acquisition.
The pro forma financial statements have been prepared using the acquisition method of accounting using the accounting guidance in Accounting Standards Codification 805, Business Combinations (“ASC 805”), with Occidental treated as the acquirer. The acquisition method of accounting is dependent upon certain valuations and other studies that, as of the date of these pro forma financial statements, have yet to commence or progress to a stage where there is sufficient information for a definitive measure. As indicated in the pro forma financial statements and under “—Purchase Price and Allocation” below, Occidental has performed a preliminary valuation analysis of the fair value of CrownRock’s assets acquired and liabilities assumed and has made certain adjustments to the historical book values of the assets and liabilities of CrownRock to reflect preliminary estimates of the fair values necessary to prepare the pro forma financial statements. Occidental is performing a detailed review of CrownRock’s accounting policies. Accordingly, the pro forma financial statements and pro forma adjustments are preliminary and have been made solely for the purpose of preparing the pro forma financial statements. Amounts used in these pro forma financial statements will differ from ultimate amounts once Occidental has completed the valuation studies necessary to finalize the required purchase price allocation and identified any necessary conforming accounting policy changes for CrownRock. Differences between these preliminary estimates and the final acquisition accounting may have a material impact on the pro forma financial statements and the combined company’s future results of operations and financial position.
The pro forma financial statements are provided for illustrative purposes only and do not purport to represent what the actual consolidated results of operations or consolidated financial position of Occidental would have been had the transactions occurred on the dates assumed, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position.
The pro forma financial statements and related notes should be read in conjunction with the separate historical consolidated financial statements and related notes of Occidental included in its Annual Report on Form 10-K for the year ended December 31, 2023 and Quarterly Report on Form 10-Q for the period ended June 30, 2024, and CrownRock included as Exhibit 99.1 to Occidental’s Current Report on Form 8-K filed on July 19, 2024 and Exhibit 99.1 to the Current Report on Form 8-K which these pro forma financial statements are filed with as Exhibit 99.2.
Purchase Price and Allocation
The aggregate value of the purchase price is approximately $11.1 billion based on the closing price of Occidental common stock of $59.38 on August 1, 2024.
Purchase Price
The following table summarizes the cash and common stock components of the approximate purchase price:
| | | | | |
| in millions, except per-share amounts | Total |
| Cash portion of purchase price | $ | 9,100 | |
| Closing Adjustments | |
| Net Working Capital and Other Purchase Price Adjustments | 257 | |
| |
| Pre-closing dividends declared by Occidental | $ | 13 | |
| Total Cash Purchase Price | $ | 9,370 |
| Total shares of Occidental common stock issued | 29.6 | |
| Share price of Occidental common stock | $ | 59.38 | |
| Stock portion of purchase price | $ | 1,755 |
| Total preliminary purchase price | $ | 11,125 |
Occidental has incurred approximately $9.7 billion aggregate principal amount of new indebtedness and has used or will use, as applicable, available cash to finance the cash purchase price of the acquisition, redeem the CrownRock 2025 notes and pay related fees and expenses.
Preliminary Purchase Price Allocation
The preliminary allocation of the approximate purchase price to the fair values of assets acquired and liabilities assumed includes pro forma adjustments for the fair value of CrownRock's assets and liabilities. The final allocation will be determined once Occidental has completed the necessary detailed valuation analysis and calculations. The final allocation could differ materially from the preliminary allocation used in these pro forma financial statements and related pro forma adjustments.
Occidental has performed a preliminary valuation analysis of the fair market value of the CrownRock assets acquired and liabilities assumed and the related allocations to such items of the approximate purchase price. The following table summarizes the allocation of the preliminary purchase price:
| | | | | | | | |
| in millions | | As of June 30, 2024 |
| Fair value of assets acquired: | | |
| Cash and cash equivalents | | $ | 431 | |
| Trade receivables, net | | 220 | |
| | |
| Other current assets | | 2 | |
| | |
| Property, plant and equipment, net | | 11,875 | |
| | |
| | |
| Amount attributable to assets acquired | | $ | 12,528 |
| Fair value of liabilities assumed: | | |
| | |
| | |
| Accrued liabilities | | 111 | |
| Long-term debt | | 1,244 | |
| Asset retirement obligations | | 48 | |
| Amount attributable to liabilities assumed | | $ | 1,403 |
| Fair value of net assets acquired: | | $ | 11,125 |
| Goodwill as of June 30, 2024: | | $ | — |
| Total preliminary purchase price: | | $ | 11,125 |
Changes in future commodity prices, reserve estimates, other changes in cost assumptions and other facts and circumstances could result in changes to the fair value of the assets identified above.
OCCIDENTAL PETROLEUM CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 2024
| | | | | | | | | | | | | | | | | | | | | | | |
| Occidental Historical | CrownRock Historical
(Adjusted) | Debt Issuance | | Acquisition Accounting and Related Transactions | | Occidental Combined Pro Forma |
| in millions | | |
| ASSETS | | | | | | | |
| Current Assets | | | | | | | |
| Cash and cash equivalents | 1,845 | | 431 | | 9,646 | | (a) | (9,370) | | (a) | 1,636 | |
| | | | | (48) | | (a) | |
| | | | | (868) | | (a) | |
| Trade receivables | 3,896 | | 220 | | — | | | — | | | 4,116 | |
| Inventories | 2,813 | | — | | — | | | — | | | 2,813 | |
| Other current assets | 1,538 | | 2 | | — | | | — | | | 1,540 | |
| Total current assets | 10,092 | | 653 | | 9,646 | | | (10,286) | | | 10,105 | |
| | | | | | | |
| Investments in Unconsolidated Entities | 3,460 | | — | | — | | | — | | | 3,460 | |
| Property, plant and equipment | | | | | | | |
| Oil and gas | 111,881 | | 7,702 | | — | | | 4,173 | | (b) | 123,756 | |
| Chemical | 8,520 | | — | | — | | | — | | | 8,520 | |
| Midstream and marketing | 8,730 | | — | | — | | | — | | | 8,730 | |
| Corporate | 1,091 | | 8 | | — | | | (8) | | (f) | 1,091 | |
| Gross property, plant and equipment | 130,222 | | 7,710 | | — | | | 4,165 | | | 142,097 | |
| Accumulated depreciation, depletion and amortization | (71,352) | | (3,533) | | — | | | 3,533 | | (b) | (71,352) | |
| Net property, plant, and equipment | 58,870 | | 4,177 | | — | | | 7,698 | | | 70,745 | |
| Operating lease assets | 1,022 | | — | | — | | | — | | | 1,022 | |
| Other long-term assets | 2,772 | | 8 | | — | | | (8) | | (b) | 2,772 | |
| TOTAL ASSETS | 76,216 | | 4,838 | | 9,646 | | | (2,596) | | | 88,104 | |
| | | | | | | |
See accompanying notes to unaudited pro forma condensed combined financial statements.
OCCIDENTAL PETROLEUM CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 2024
| | | | | | | | | | | | | | | | | | | | | | | |
| Occidental Historical | CrownRock Historical
(Adjusted) | Debt Issuance | | Acquisition Accounting and Related Transactions | | Occidental Combined Pro Forma |
| in millions | | |
| LIABILITIES AND EQUITY | | | | | | | |
| Current Liabilities | | | | | | | |
| Current maturities of long-term debt | 1,347 | | — | | 2,000 | | (c) | — | | | 3,347 | |
| Current operating lease liabilities | 410 | | — | | — | | | — | | | 410 | |
| Accounts payable | 4,282 | | — | | — | | | — | | | 4,282 | |
| Accrued liabilities | 3,660 | | 111 | | — | | | — | | | 3,771 | |
| Total current liabilities | 9,699 | | 111 | | 2,000 | | | — | | | 11,810 | |
| | | | | | | |
| Long-term debt, net | 18,390 | | 1,239 | | 7,646 | | (c) | 5 | | (b) | 26,412 | |
| | | | | (868) | | (a) | |
| | | | | | | |
| Deferred credits and other liabilities | | | | | | | |
| Deferred income taxes, net | 5,680 | | — | | — | | | — | | | 5,680 | |
| Asset retirement obligations | 3,848 | | 48 | | — | | | — | | | 3,896 | |
| Pension and postretirement obligations | 935 | | — | | — | | | — | | | 935 | |
| Environmental remediation liabilities | 857 | | — | | — | | | — | | | 857 | |
| Operating lease liabilities | 668 | | — | | — | | | — | | | 668 | |
| Other | 3,880 | | — | | — | | | — | | | 3,880 | |
| Total deferred credits and other liabilities | 15,868 | | 48 | | — | | | — | | | 15,916 | |
| | | | | | | |
| Equity | | | | | | | |
| Preferred stock, at par value | 8,287 | | — | | — | | | — | | | 8,287 | |
| Common stock, at par value | 227 | | — | | — | | | 6 | | (g) | 233 | |
| Treasury stock | (15,591) | | — | | — | | | — | | | (15,591) | |
| Additional paid-in capital | 17,928 | | 3,440 | | — | | | (1,691) | | (g) | 19,677 | |
| Retained earnings | 20,938 | | — | | — | | | (48) | | (a) | 20,890 | |
| Accumulated other comprehensive income | 264 | | — | | — | | | — | | | 264 | |
| Total stockholders’ equity | 32,053 | | 3,440 | | — | | | (1,733) | | | 33,760 | |
| Non-controlling interest | 206 | | — | | | | — | | | 206 | |
| Total equity | 32,259 | | 3,440 | | — | | | (1,733) | | | 33,966 | |
| | | | | | | |
| TOTAL LIABILITIES AND EQUITY | 76,216 | | 4,838 | | 9,646 | | | (2,596) | | | 88,104 | |
See accompanying notes to unaudited pro forma condensed combined financial statements.
OCCIDENTAL PETROLEUM CORPORATION
UNAUDITED PRO FORMA STATEMENT OF COMBINED OPERATIONS
SIX MONTHS ENDED JUNE 30, 2024
| | | | | | | | | | | | | | | | | | | | | | | |
| in millions except per-share amounts | Occidental Historical | CrownRock Historical
(Adjusted) | Debt Issuance | | Acquisition Accounting and Related Transactions | | Occidental Combined Pro Forma |
| |
| Revenues and other income | | | | | | | |
| Net sales | 12,792 | 1,265 | | — | | | — | | | 14,057 | |
| Interest, dividends and other income | 70 | | 6 | | — | | | — | | | 76 | |
| Gains (losses) on sales of assets and other, net | 27 | | — | | — | | | — | | | 27 | |
| Total | 12,889 | | 1,271 | | — | | | — | | | 14,160 | |
| | | | | | | |
| Costs and other deductions | | | | | | | |
| Oil and gas lease operating expense | 2,340 | | 216 | | — | | | — | | | 2,556 | |
| Transportation and gathering expense | 758 | | — | | — | | | — | | | 758 | |
| Chemical and midstream cost of sales | 1,563 | | — | | — | | | — | | | 1,563 | |
| Purchased commodities | 175 | | — | | — | | | — | | | 175 | |
| Selling, general and administrative expenses | 518 | | 9 | | — | | | — | | | 527 | |
| Other operating and non-operating expense | 754 | | — | | — | | | — | | | 754 | |
| Taxes other than on income | 500 | | 65 | | — | | | — | | | 565 | |
| Depreciation, depletion and amortization | 3,468 | | 325 | | — | | | 110 | | (d) | 3,903 | |
| Acquisition-related costs | 26 | | — | | — | | | — | | | 26 | |
| Exploration expense | 149 | | — | | — | | | — | | | 149 | |
| Interest and debt expense, net | 536 | | 39 | | 306 | | (c) | (24) | | (c) | 857 | |
| Total | 10,787 | | 654 | | 306 | | | 86 | | | 11,833 | |
| Income (loss) before income taxes and other items | 2,102 | | 617 | | (306) | | | (86) | | | 2,327 | |
| Other items | | | | | | | |
| | | | | | | |
| Income from equity investments and other | 543 | | (2) | | — | | | — | | | 541 | |
| Total | 543 | | (2) | | — | | | — | | | 541 | |
| Income (loss) before income taxes | 2,645 | | 615 | | (306) | | | (86) | | | 2,868 | |
| Income tax expense | (769) | | — | | 67 | | (e) | (117) | | (e) | (819) | |
| Income (loss) from continuing operations | 1,876 | | 615 | | (239) | | | (203) | | | 2,049 | |
| | | | | | | |
| Less: Net income attributable to noncontrolling interests | (8) | | — | | — | | | — | | | (8) | |
| Less: Preferred stock dividends | (340) | | — | | — | | | — | | | (340) | |
| Income (loss) from continuing operations attributable to Common Stockholders | 1,528 | | 615 | | (239) | | | (203) | | | 1,701 | |
| Net income from continuing operations attributable to common stockholders—basic | $ | 1.71 | | | | | | | $ | 1.84 | |
| Net income from continuing operations attributable to common stockholders—diluted | $ | 1.59 | | | | | | | $ | 1.72 | |
| | | | | | | |
| Weighted-average number of basic shares | 889.2 | | | | 29.6 | (i) | 918.8 |
| Diluted weighted-average common shares | 954.1 | | | | 29.6 | (i) | 983.7 |
See accompanying notes to unaudited pro forma condensed combined financial statements.
OCCIDENTAL PETROLEUM CORPORATION
UNAUDITED PRO FORMA STATEMENT OF COMBINED OPERATIONS
YEAR ENDED DECEMBER 31, 2023
| | | | | | | | | | | | | | | | | | | | | | | |
| in millions except per-share amounts | Occidental Historical | CrownRock Historical
(Adjusted) | Debt Issuance | | Acquisition Accounting and Related Transactions | | Occidental Combined Pro Forma |
| |
| Revenues and other income | | | | | | | |
| Net sales | 28,257 | | 2,521 | | — | | | (1) | | (f) | 30,777 | |
| Interest, dividends and other income | 139 | | 5 | | — | | | (1) | | (f) | 143 | |
| Gains (losses) on sales of assets and other, net | 522 | | 2 | | — | | | (24) | | (f) | 500 | |
| Total | 28,918 | | 2,528 | | — | | | (26) | | | 31,420 | |
| | | | | | | |
| Costs and other deductions | | | | | | | |
| Oil and gas lease operating expense | 4,677 | | 386 | | — | | | (2) | | (f) | 5,061 | |
| Transportation and gathering expense | 1,481 | | — | | — | | | — | | | 1,481 | |
| Chemical and midstream cost of sales | 3,116 | | — | | — | | | — | | | 3,116 | |
| Purchased commodities | 2,009 | | — | | — | | | — | | | 2,009 | |
| Selling, general and administrative expenses | 1,083 | | 24 | | — | | | (1) | | (f) | 1,106 | |
| Other operating and non-operating expense | 1,084 | | — | | — | | | — | | | 1,084 | |
| Taxes other than on income | 1,087 | | 139 | | — | | | — | | | 1,226 | |
| Depreciation, depletion and amortization | 6,865 | | 635 | | — | | | 187 | | (d)(f) | 7,687 | |
| Asset impairments and other charges | 209 | | — | | — | | | — | | | 209 | |
| Acquisition-related costs | 26 | | — | | — | | | — | | | 26 | |
| Exploration expense | 441 | | 6 | | — | | | (5) | | (f) | 442 | |
| Interest and debt expense, net | 945 | | 82 | | 613 | | (c) | (49) | | (c) | 1,591 | |
| Total | 23,023 | | 1,272 | | 613 | | | 130 | | | 25,038 | |
| Income (loss) before income taxes and other items | 5,895 | | 1,256 | | (613) | | | (156) | | | 6,382 | |
| Other items | | | | | | | |
| | | | | | | |
| Income from equity investments and other | 534 | | 23 | | — | | | — | | | 557 | |
| Total | 534 | | 23 | | — | | | — | | | 557 | |
| Income (loss) from continuing operations before income taxes | 6,429 | | 1,279 | | (613) | | | (156) | | | 6,939 | |
| Income tax expense | (1,733) | | — | | 135 | | (e) | (247) | | (e) | (1,845) | |
| Income (loss) from continuing operations | 4,696 | | 1,279 | | (478) | | | (403) | | | 5,094 | |
| | | | | | | |
| Less: Preferred stock dividends and redemption premiums | (923) | | — | | — | | | — | | | (923) | |
| Income (loss) from continuing operations attributable to Common Stockholders | 3,773 | | 1,279 | | (478) | | | (403) | | | 4,171 | |
| Net income attributable to common stockholders—basic | $ | 4.22 | | | | | | | $ | 4.52 | |
| Net income attributable to common stockholders—diluted | $ | 3.90 | | | | | | | $ | 4.19 | |
| | | | | | | |
| Weighted-average number of basic shares | 889.2 | | | | 29.6 | (i) | 918.8 |
| Diluted weighted-average common shares | 960.9 | | | | 29.6 | (i) | 990.5 |
See accompanying notes to unaudited pro forma condensed combined financial statements.
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
a) Reflects sources of/(uses of) cash upon the completion of the acquisition as follows:
| | | | | |
| millions | As of June 30, 2024 |
| Issuance of indebtedness | $ | 9,700 | |
| Issuance costs | (54) | |
| Net cash from issuance of indebtedness | $ | 9,646 |
| |
| Cash portion of preliminary purchase price | $ | 9,100 | |
| |
| Net working capital and other purchase price adjustments | 257 | |
| Pre-closing dividends declared by Occidental | 13 | |
| Total cash purchase price | $ | 9,370 |
| |
Acquisition-related transaction costs1 | $ | (48) | |
| Redemption of CrownRock 2025 notes | $ | (868) | |
1 Represents an estimate of acquisition-related transaction costs, including fees related to advisory, legal, investment banking and other professional services, all of which are directly attributable to the acquisition. These are non-recurring charges and have been excluded from the unaudited pro forma statements of operations.
b) Reflects the fair value adjustments to CrownRock’s assets and liabilities, including property, plant, and equipment and debt. See "Purchase Price and Allocation" above.
c) Represents pro forma adjustments to current and long-term debt, which includes the incurrence of $9.7 billion aggregate principal amount of new indebtedness, with a weighted average annual interest rate of 6.22%, yielding net proceeds of $2.0 billion and $7.6 billion in current and long-term debt, respectively. Proceeds are net of $54 million in debt issuance costs. Interest rates are based on underlying U.S. Treasury rates adjusted for Occidental's anticipated credit spreads across a range of maturities.
| | | | | | | | | | | | | | |
| in millions, except for interest rates | Principal Amount | Interest Rate (1) | Estimated interest expense for the six months ended June 30, 2024 | Estimated interest expense for the year ended December 31, 2023 |
| Notes | 5,000 | | 5.47 | % | $ | 137 | | $ | 273 | |
| Term loan (364 day) | 2,000 | | 6.94 | % | 69 | | 139 | |
| Term loan (2 year) | 2,700 | | 7.07 | % | 95 | | 191 | |
| Total debt assumed issued | $ | 9,700 | | 6.22 | % | $ | 301 | | $ | 603 | |
| | | | |
| Amortization of term loan debt issuance costs | | | 2 | | 4 | |
| Amortization of notes debt issuance costs | | | 3 | | 6 | |
| | |
| Total interest expense | | | $ | 306 | | $ | 613 | |
| | | | |
1 The interest rates for the term loans are the July 30, 2024 SOFR of 5.342% plus the applicable margin as specified in the respective debt agreements. The rate for the notes is the pro-forma weighted average interest rate as issued.
Occidental has elected to redeem approximately $868 million of the $1.2 billion of assumed debt of CrownRock after the closing of the acquisition, which is reflected above in Note (a). The redemption of the CrownRock 2025 notes results in a decrease in CrownRock’s interest expense of $24 million and $49 million for the six months ended June 30, 2024 and the year ended December 31, 2023, respectively.
A 1/8 of a percent change in the interest rate of the $4.7 billion in term loans would increase or decrease the interest expense by $3 million for the six months ended June 30, 2024 and $6 million for the year ended December 31, 2023.
d) Reflects adjustments to historical depreciation, depletion and amortization ("DD&A") expense related to the step up of property, plant and equipment to estimated fair value. Pro forma DD&A expense related to the assets acquired through the acquisition is $110 million for the six months ended June 30, 2024 and $189 million for the year ended December 31, 2023.
e) Reflects the income tax effects of the pro forma adjustments included in the pro forma statements of operations for the six months ended June 30, 2024 and for the year ended December 31, 2023, including an adjustment for income taxes for
historical CrownRock that would have been recorded as a result of the acquisition. The effective tax rate of the combined company could be significantly different from what is presented in these pro forma financial statements for a variety of reasons, including post-merger activities.
f) Reflects adjustments to eliminate CrownRock’s historical revenue and expense related to certain subsidiaries retained by CrownQuest Operating, LLC (“CrownQuest”), the parent company of CrownRock, per the purchase agreement. Revenue and expenses related to such subsidiaries totaled $26 million and $10 million, respectively, for the year ended December 31, 2023. These subsidiaries were distributed to CrownQuest as of January 31, 2024. Revenue and expenses related to these subsidiaries for the month of January are immaterial.
g) Reflects elimination of CrownRock Partners’ Capital and issuance of 29.6 million shares of Occidental common stock, totaling approximately $1.8 billion in common stock based on the August 1, 2024 share price of $59.38:
| | | | | |
| in millions | As of June 30, 2024 |
| Stock portion of purchase price: | |
| Common stock, $0.20 per share par value, issued in the acquisition | $ | 6 | |
| Pro forma adjustment to paid-in capital in excess of par value for common stock issued in the acquisition | 1,749 | |
| Stock portion of purchase price | $ | 1,755 |
| |
| Acquisition adjustment to paid-in capital in excess of par value for common stock: | |
| Pro forma adjustment to paid-in capital in excess of par value for common stock issued in the acquisition | $ | 1,749 | |
| Elimination of CrownRock Partners’ Capital | (3,440) |
| Acquisition adjustment to paid-in capital in excess of par value for common stock | (1,691) |
h) The following reclassifications were made to conform CrownRock's historical financial results to Occidental's presentation on the pro forma financial statements:
| | | | | | | | |
Balance Sheet
in millions | As of June 30, 2024 |
Reclassification from
CrownRock
Historical | Reclassification to
CrownRock
Historical
(Adjusted) |
| Assets | | |
| Trade receivables | $ | $ | 220.2 |
| Other current assets | | 1.6 |
| Property, plant and equipment | | |
| Oil and gas | | 7,702.0 | |
| Corporate | | 8.0 |
| Accumulated depreciation, depletion and amortization | | (3,533.0) | |
| Other long-term assets | | 8.4 |
| Accounts receivable - related party | | |
| Oil and natural gas | 189.9 | | |
| Other | 30.3 | | |
| Prepaid costs and other current assets | 1.6 | | |
| Oil and natural gas properties, net, successful efforts method of accounting | 4,034.0 | | |
| Other property and equipment, net | 143.0 | | |
| Deferred loan costs, net | 8.4 | | |
| Liabilities | | |
| Accrued liabilities | | 110.8 |
| Accrued drilling cost – related party | 81.9 | | |
| Other accrued liabilities – related party | 15.2 | | |
| Accrued interest payable | 13.3 | | |
| | |
| Asset retirement obligations, current portion | 0.4 | | |
| Equity | | |
| Additional paid-in capital | | 3,440.0 |
| CrownRock, L.P. Partners' Capital | 3,440.0 | | |
| Total | $ | 7,958 | $ | 7,958 |
| | | | | | | | | | | | | | | | | |
Income Statement
in millions | For six months ended June 30, 2024 | | For the year ended December 31, 2023 |
Reclassification from
CrownRock
Historical | Reclassification to
CrownRock
Historical
(Adjusted) | | Reclassification from
CrownRock
Historical | Reclassification to
CrownRock
Historical
(Adjusted) |
| Revenues and other income | | | | | |
| Net sales | $ | $ | 1,264.5 | | | $ | $ | 2,520.9 |
| Interest, dividends and other income | | 6.4 | | | 4.8 |
| Gains on sales of assets and other, net | | — | | | 2.1 |
| Oil and natural gas sales | 1,187.0 | | | 2,381.9 | | |
| Gain on sales and exchanges of oil and natural gas properties | — | | | | 2.1 | | |
| Saltwater disposal | 40.9 | | | 66.9 | | |
| Gathering system rent and transportation fees | 26.3 | | | 47.9 | | |
| Fresh water supply | 7.8 | | | 20.0 | | |
| Surface ownership | 2.4 | | | 4.1 | | |
| Interest income | 6.4 | | | | 4.8 | |
| Costs and other deductions | | | | | |
| Oil and gas lease operating expense | | 215.9 | | | 385.5 |
| Selling, general and administrative expenses | | 8.6 | | | 24.2 |
| Taxes other than on income | | 64.7 | | | 138.8 |
| Depreciation, depletion and amortization | | 1.1 | | | 2.0 |
| Lease operating expense | 215.9 | | | 385.5 | |
| Production and ad valorem taxes | 64.7 | | | 138.8 | |
| Accretion of discount on asset retirement obligation | 1.1 | | | 2.0 | |
| General and administrative | 8.6 | | | 24.2 | |
| Other items | | | | | |
| Income from equity investments and other | | (1.5) | | | 23.2 |
| Gain (loss) on derivatives not designated as hedges | — | | | | 0.2 | |
| Gain on extinguishment of debt | — | | | | 1.5 | |
| Other income (expense), net | (1.5) | | | | 21.5 | |
| Total | $ | 1,560 | $ | 1,560 | | $ | 3,101 | $ | 3,101 |
i) Reflects the issuance of approximately 29.6 million shares of Occidental common stock to the holders of the CrownRock interests as a portion of the consideration for the acquisition. The following table reconciles historical and pro forma basic and diluted earnings per share utilizing the two-class method for the periods indicated:
| | | | | | | | | | | | | | | | | |
| in millions, except per-share amounts | For six months ended June 30, 2024 | | For year ended December 31, 2023 |
| Occidental Historical | Occidental Combined Pro Forma | | Occidental Historical | Occidental Combined Pro Forma |
| Income from continuing operations attributable to common stock | $ | 1,528 | | $ | 1,701 | | | $ | 3,773 | | $ | 4,171 | |
| Less: Net income allocated to participating securities | (10) | | (10) | | | (21) | | (21) | |
| Net income, net of participating securities | $ | 1,518 | | $ | 1,691 | | | $ | 3,752 | | $ | 4,150 | |
| | | | | |
| Weighted-average number of basic shares | 889.2 | 918.8 | | 889.2 | 918.8 |
| Dilutive securities | 64.9 | 64.9 | | 71.7 | 71.7 |
| Diluted weighted average common shares outstanding | 954.1 | 983.7 | | 960.9 | 990.5 |
| | | | | |
| Basic income from continuing ops per common share | $ | 1.71 | | $ | 1.84 | | | $ | 4.22 | | $ | 4.52 | |
| Diluted income from continuing ops per common share | $ | 1.59 | | $ | 1.72 | | | $ | 3.90 | | $ | 4.19 | |
Supplemental Pro Forma Crude Oil, Natural Gas Liquids ("NGLs") and Natural Gas Reserves Information
The following tables present the estimated pro forma combined net proved developed and undeveloped crude oil, NGLs and natural gas reserves as of December 31, 2023, along with a summary of changes in quantities of net remaining proved reserves during the year ended December 31, 2023.
The following estimated pro forma reserve information is not necessarily indicative of the results that might have occurred had the transactions been completed on January 1, 2023 and is not intended to be a projection of future results. Future results may vary significantly from the results reflected because of various factors, including those discussed in the section entitled "Risk Factors" in Occidental’s Annual Report on Form 10-K for the year ended December 31, 2023.
| | | | | | | | | | | |
| Oil Reserves | Occidental Historical | CrownRock Historical | Occidental Combined Pro Forma |
| in millions of barrels (MMbbl) |
| PROVED DEVELOPED AND UNDEVELOPED RESERVES |
| Balance at December 31, 2022 | 1,913 | 249 | 2,162 |
| Revisions of previous estimates | 168 | (14) | | 154 |
| Improved recovery | 18 | — | | 18 |
| Extensions and discoveries | 62 | 64 | 126 |
| Purchases of proved reserves | 14 | — | | 14 |
| Sales of proved reserves | (1) | — | | (1) |
| Production | (234) | (27) | | (261) |
| Balance at December 31, 2023 | 1,940 | 272 | 2,212 |
| DOMESTIC PROVED RESERVES | 1,600 | 272 | 1,872 |
| INTERNATIONAL PROVED RESERVES | 340 | — | | 340 |
| PROVED DEVELOPED RESERVES | | | |
| December 31, 2023 | 1,398 | 122 | 1,520 |
| PROVED UNDEVELOPED RESERVES | | | |
| December 31, 2023 | 542 | 150 | 692 |
| NGL Reserves | Occidental Historical | CrownRock Historical | Occidental Combined Pro Forma |
| in millions of barrels (MMbbl) |
| PROVED DEVELOPED AND UNDEVELOPED RESERVES |
| Balance at December 31, 2022 | 846 | 181 | 1,027 |
| Revisions of previous estimates | 185 | 9 | 194 |
| Improved recovery | 2 | — | | 2 |
| Extensions and discoveries | 45 | 41 | 86 |
| Purchases of proved reserves | 9 | — | | 9 |
| Sales of proved reserves | (1) | — | | (1) |
| Production | (103) | (15) | | (118) |
| Balance at December 31, 2023 | 983 | 216 | 1,199 |
| DOMESTIC PROVED RESERVES | 802 | 216 | 1,018 |
| INTERNATIONAL PROVED RESERVES | 181 | — | | 181 |
| PROVED DEVELOPED RESERVES | | | |
| December 31, 2023 | 639 | 112 | 751 |
| PROVED UNDEVELOPED RESERVES | | | |
| December 31, 2023 | 344 | 104 | 448 |
| | | | | | | | | | | |
Natural Gas Reserves in billions of cubic feet (Bcf) PROVED DEVELOPED AND UNDEVELOPED RESERVES | Occidental Historical | CrownRock Historical | Occidental Combined Pro Forma |
| Balance at December 31, 2022 | 6,350 | 865 | 7,215 |
| Revisions of previous estimates | 319 | 80 | 399 |
| Improved recovery | 18 | — | | 18 |
| Extensions and discoveries | 273 | 203 | 476 |
| Purchases of proved reserves | 50 | — | | 50 |
| Sales of proved reserves | (2) | | — | | (2) |
| Production | (656) | (73) | | (729) |
| Balance at December 31, 2023 | 6,352 | 1,075 | 7,427 |
| DOMESTIC PROVED RESERVES | 4,235 | 1,075 | 5,310 |
| INTERNATIONAL PROVED RESERVES | 2,117 | — | | 2,117 |
| PROVED DEVELOPED RESERVES | | | |
| December 31, 2023 | 4,277 | 558 | 4,835 |
| PROVED UNDEVELOPED RESERVES | | | |
| December 31, 2023 | 2,075 | 517 | 2,592 |
| Total Reserves | Occidental Historical | CrownRock Historical | Occidental Combined Pro Forma |
| in millions of BOE (MMBOE) |
| PROVED DEVELOPED AND UNDEVELOPED RESERVES |
| Balance at December 31, 2022 | 3,817 | 574 | 4,391 |
| Revisions of previous estimates | 406 | 8 | 414 |
| Improved recovery | 23 | — | | 23 |
| Extensions and discoveries | 153 | 138 | 291 |
| Purchases of proved reserves | 31 | — | | 31 |
| Sales of proved reserves | (2) | — | | (2) |
| Production | (446) | (54) | | (500) |
| Balance at December 31, 2023 | 3,982 | 666 | 4,648 |
| DOMESTIC PROVED RESERVES | 3,108 | 666 | 3,774 |
| INTERNATIONAL PROVED RESERVES | 874 | — | 874 |
| PROVED DEVELOPED RESERVES | | | |
| December 31, 2023 | 2,750 | 326 | 3,076 |
| PROVED UNDEVELOPED RESERVES | | | |
| December 31, 2023 | 1,232 | 340 | 1,572 |
Standardized measure of discounted future net cash flows
The following tables present the estimated pro forma discounted future net cash flows at December 31, 2023. The pro forma standardized measure information set forth below gives effect to the transactions as if the transactions had been completed on January 1, 2023. The disclosures below were determined by referencing the "Standardized Measure of Discounted Future Net Cash Flows" reported in Occidental's Annual Report on Form 10-K for the year ended December 31, 2023 and in the consolidated financial statements and related notes of CrownRock for the year ended December 31, 2023. An explanation of the underlying methodology applied, as required by U.S. Securities and Exchange Commission regulations, can be found within Occidental’s Annual Report on Form 10-K for the year ended December 31, 2023 and CrownRock’s consolidated financial statements and related notes for the year ended December 31, 2023. The calculations assume the continuation of existing economic, operating and contractual conditions at December 31, 2023.
Therefore, the following estimated pro forma standardized measure is not necessarily indicative of the results that might have occurred had the transactions been completed on January 1, 2023 and is not intended to be a projection of future results. Future results may vary significantly from the results reflected because of various factors, including those discussed in the section entitled "Risk Factors" in Occidental’s Annual Report on Form 10-K for the year ended December 31, 2023.
| | | | | | | | | | | |
| in millions | Occidental
Historical | CrownRock Historical | Occidental
Combined Pro Forma |
| AS OF DECEMBER 31, 2023 | | | |
| Future cash inflows | $ | 178,491 | $ | 25,759 | | $ | 204,250 | |
| Future costs | | | |
| Production costs and other operating expenses | (69,785) | (7,646) | (77,431) |
| Development costs | (23,110) | (3,349) | (26,459) |
| Future income tax expense | (15,336) | — | (15,336) |
| Future net cash flows | $ | 70,260 | $ | 14,764 | $ | 85,024 | |
| Ten percent discount factor | (29,958) | (6,390) | (36,348) |
| Standardized measure of discounted future net cash flows | $ | 40,302 | $ | 8,374 | | $ | 48,676 | |
Changes in the standardized measure of discounted future net cash flows from proved reserve quantities
The changes in the pro forma standardized measure of discounted future net cash flows relating to proved crude oil, NGLs and natural gas reserves for the year ended December 31, 2023 are as follows:
| | | | | | | | | | | |
| in millions | Occidental
Historical | CrownRock Historical | Occidental
Combined Pro Forma
|
| Beginning of year | $ | 58,152 | $ | 12,263 | | $ | 70,415 | |
| Sales and transfers of oil and gas produced, net of production costs and other operating expenses | (14,318) | (1,858) | (16,176) |
| Net change in prices received per barrel, net of production costs and other operating expenses | (23,774) | (4,255) | (28,029) |
| Extensions, discoveries and improved recovery, net of future production and development costs | 2,910 | 1,553 | 4,463 |
| Change in estimated future development costs | (3,430) | 965 | (2,465) |
| Revisions of quantity estimates | 6,313 | (589) | 5,724 |
| Previously estimated development costs incurred during the period | 2,584 | — | 2,584 |
| Accretion of discount | 6,152 | 1,226 | 7,378 |
| Net change in income taxes | 5,575 | — | 5,575 |
| Purchases and sales of reserves in place, net | 404 | (4) | 400 |
| Changes in production rates and other | (266) | (927) | (1,193) |
| Net change | (17,850) | (3,889) | (21,739) |
| End of year | $ | 40,302 | $ | 8,374 | | $ | 48,676 | |
