Occidental Petroleum and Ecopetrol, Colombia’s state-owned oil company, have formed a joint venture to develop assets in the Midland Basin, Kallanish Energy learns.
Ecopetrol will pay Oxy $750 million cash up front and another $750 million to fund a portion of Oxy’s share of the JV expenses, according to Occidental’s second-quarter report. Occidental will contribute 97,000 net acres in the Midland Basin to the JV.
The agreement lets Oxy energize its Midland Basin development program, which has only minimal activity right now, according to the quarterly report. A majority of Anadarko’s onshore U.S. oil production comes from the Denver-Julesburg Basin northeast of Denver, Colorado.
The companies will split the business 51-49, favoring Oxy, which will operate the JV. However, Ecopetrol will fund 75% of the JV’s capital expenditures as part of the deal, according to the report.
The deal gives Ecopetrol a chance to send its own employees to work on the project, developing its ability to use horizontal drilling, hydraulic fracturing and other shale-related techniques in Colombia.
“We are pleased to announce this alliance that is aligned with our strategy. This is a milestone for Ecopetrol because we enter the big leagues of the non-conventional deposits, we will increase our reserves and production, and we will strengthen our knowledge in this technology together with a first-level partner,” said Ecopetrol president Felipe Bayón.
Oxy and Ecopetrol expect the deal forming their Permian Basin joint venture to close in the fourth quarter.
The joint venture announcement preceded by days the closing of Occidental’s $55 billion deal to acquire Anadarko Petroleum, following overwhelming approval by Anadarko shareholders Thursday.
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