Occidental Petroleum just bought Carbon Engineering for $1.1 billion

Occidental Petroleum Corp (NYSE: OXY) just announced plans of buying Carbon Engineering for about $1.1 billion. Its shares are down 2.0% at writing.

What’s in it for Occidental Petroleum?

The oil and gas giant expects this acquisition to help expand its footprint in carbon capture and storage. It has been working with the Canadian clean energy company since 2019.

Occidental is yet to secure regulatory approval for the said transaction that it hopes will complete by the end of this year. Vicki Hollub – its Chief Executive said today in a press release:

We expect the acquisition to deliver shareholders value through improved drive for tech innovation and accelerated DAC cost reductions. It also adds new revenue streams of tech licensing and royalties.

The stock market news arrives shortly after Occidental Petroleum reported its financial results for the second quarter that missed Street estimates.

Occidental will pay for this deal in cash

Occidental plans on paying for this acquisition in three nearly equal cash instalments – the first of which will be made on closing. Its CEO Hollub also said today:

The acquisition enables Occidental to catalyse broader development partnerships for DAC deployment in the most capital efficient and valuable way.

Oxy Low Carbon Ventures will own 100% of Carbon Engineering once the agreement is complete. Note that legendary investor Warren Buffett’s conglomerate Berkshire Hathaway has been adding to its position in Occidental Petroleum this year and now owns over 25% of it.

Wall Street currently has a consensus “overweight” rating on the oil and gas stock.  

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