Occidental Petroleum has formed a new joint venture to accelerate development plans in the Permian Basin, the centre of the US shale boom, ahead of the expected completion of its $55bn takeover of Anadarko Petroleum.
The Houston-based group said it entered into an agreement on Wednesday to form the joint venture with Columbian state-run oil company Ecopetrol to develop 97,000 net acres of Occidental’s holdings in the Permian’s Midland Basin.
The deal is worth up to $1.5bn, comprised of $750m in cash at closing and $750m of carried capital, and is expected to close in the fourth quarter of this year. Occidental will own a 51 per cent stake in the venture, while Ecopetrol will own the remaining 49 per cent.
Occidental won a bidding war in May to buy rival US energy producer Anadarko in a $55bn deal backed by Warren Buffett’s Berkshire Hathaway, which pledged to invest $10bn to finance it.
The deal faces pushback from Occidental shareholder Carl Icahn, the activist investor, who has sued the company and launched an effort to replace four members of the company’s board. Occidental chief executive Vicki Hollub asked shareholders in a letter to reject Mr Icahn’s board nominees, saying he “does not understand” the financial benefits of the merger and his nominees would interfere with the company’s ability to integrate Anadarko’s assets.
Anadarko shareholders are set to vote on the deal on August 8.
The new joint venture came alongside Occidental’s quarterly results, which revealed earnings that exceeded analysts’ forecasts.
The company reported net income of $635m for the second quarter that ended in June, compared with $848m in the year-ago period. Core earnings were 97 cents a share, beating forecasts for 93 cents. Revenues rose to $4.48bn from $4.13bn.
Occidental attributed the decline in net income to lower realised crude oil prices and $50m in additional costs related to the Anadarko acquisition.
Shares in Occidental were up 0.2 per cent at $51.45 in after-hours trading.
Copyright The Financial Times Limited . All rights reserved. Please don't copy articles from FT.com and redistribute by email or post to the web.