IKAV, the international asset management group, announced today that a merger agreement has been signed to combine Aera Energy LLC (“Aera”) with California Resources Corporation (NYSE: CRC) under which the two companies will combine to reshape the energy industry in California. The merger is an all-stock transaction valued at $2.1 billion.
Formed in June 1997, Aera is one of California’s largest oil and gas producers, accounting for nearly 25% of the state’s production. Aera is owned by IKAV (51%) and Canada Pension Plan Investment Board (CPP Investments), who hold 49%. Post closing, IKAV and CPP Investments will collectively hold 22.9% of CRC’s common stock.
CRC is an independent energy and carbon management company committed to the energy transition. Aera Energy is one of California’s major energy producers and a leading developer of carbon management projects. Together, this combination is expected to create a leader in California’s energy transition, producing low carbon intensity fuels that California needs while accelerating the decarbonization of the state’s industrial and energy industries.
The merger will make Aera and CRC California’s largest oil and gas company by production. It will be the largest producer in the state with a combined net production of nearly 150,000 boe/d and proved reserves of 680 million boe at year-end 2022.
The transaction is an important milestone for both Aera and CRC as it will create significant scale and efficiency synergies. These are expected to be primarily realized through lower operating costs, capital efficiencies, overhead reductions and optimization of shared field infrastructure and to total $150 million annually. Cumulative synergies over the next decade have an estimated PV-10 value of nearly $1.0 billion.
Both companies benefit from long-standing, in-depth expertise in carbon capture and storage and are committed to play a pivotal role in reducing California’s carbon emissions. The combination of their businesses will accelerate their decarbonization plans and enable them to lead some of California’s first significant carbon sequestration and direct air capture projects and create significant CO2 pore space (1.9 million net mineral acres).
Constantin von Wasserschleben, Chairman of IKAV, comments: “The combination of Aera and CRC has strong industrial logic and aligns with our philosophy to make investments that effect positive change in the world. The merger brings together the strengths of both companies, who will be better together to operate what will be the largest oil and gas company in California by production. We believe that the world needs access to affordable, reliable and lower carbon energy sources and we advocate a co-existence between renewable and conventional energy for decades to come. We look forward to partnering with the CRC team to shape the future path of the energy transition.”
The transaction is expected to close in the second half of 2024, subject to customary closing conditions, regulatory approvals and CRC shareholder approval.
Wells Fargo acted as lead financial advisor and Truist Securities also acted as financial advisor. Latham & Watkins LLP is serving as legal advisor to IKAV & CPPIB. Citi and Jefferies are serving as financial advisors and Sullivan & Cromwell LLP is serving as legal advisor to CRC.
IKAV has an established track record in owning and operating US-based energy assets. In 2019, IKAV acquired BP’s San Juan gas assets, which are in Colorado and New Mexico and comprise approximately 600,000 acres, producing around 600 mmcfe/d. Led by Bobby Saadati, the US team has offices in Durango, Colorado and Houston, Texas.
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Formed in 1997, AERA is based in Bakersfield, California, in the heart of Kern County – one of the largest oil-producing regions in the nation – with additional operations in Ventura, Monterey and Fresno counties. AERA is known for excellent safety and environmental performance. For more information about AERA, please visit www.AERAenergy.com.
IKAV is an international asset management group headquartered in Germany, with local offices in Luxembourg, Italy, Spain, Portugal, USA and France. The group was established in 2010. It provides institutional investors with investment solutions spanning a broad range of infrastructure energy assets, including solar, concentrated solar power, wind, energy efficiency, geothermal, thermal power plants & upstream. IKAV is a buy & hold investor with a vertically integrated business model to optimize its investment portfolio and to make its assets in line with the global net zero strategy over the upcoming decades. For more information, please visit ikav.com.
About California Resources Corporation
CRC is an independent energy and carbon management company committed to energy transition. CRC produces some of the lowest carbon intensity oil in the US and is focused on maximizing the value of its land, mineral and technical resources for decarbonization efforts. For more information about CRC, please visit www.crc.com.
About CPP Investments
Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that manages the Fund in the best interest of the more than 21 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. As of September 30, 2023, the Fund totaled C$576 billion. For more information, please visit www.cppinvestments.com.