Occidental Petroleum Divests Non-Core Assets To Lower Debt
Zacks Investment Research | Oct 02, 2019 09:23PM ET
Occidental Petroleum Corporation (NYSE:OXY) announced that it has completed the divestiture of Anadarko Petroleum’s Mozambique LNG stake to TOTAL S.A. (NYSE:TOT) for $3.9 billion. This deal is part of Occidental Petroleum’s binding agreement to sell Anadarko’s African assets to TOTAL for $8.8 billion.
In addition to Mozambique, Anadarko’s assets located in Algeria, Ghana and South Africa will be sold to TOTAL, per the agreement entered into between the companies in August 2019. Occidental Petroleum also completed the sale of its holdings in Plains All American Pipeline, L.P. (NYSE:PAA) and Plains GP Holdings, L.P. (NYSE:PAGP) for $650 million.
Thanks to the divestiture of these non-core assets, the company is on track to achieve its asset divestiture target in the range of $10-$15 billion. In addition to divesting non-core assets, Occidental Petroleum expanded operations in the Midland Basin via a partnership with Ecopetrol.
The company utilized the net proceeds from the sale of these assets to de-lever its balance sheet, and focus on investment in higher-margin and high-return production from Permian resources.
Occidental Petroleum Poised to Gain
Occidental Petroleum had to resort to high-cost debt from Warren Buffett's Berkshire Hathaway (NYSE:BRKa) to complete the acquisition of Anadarko. Although this acquisition added more debt to Occidental Petroleum’s balance sheet, the contribution from high-quality acquired assets will assist the company to carry on strong performance.
The combined company will have a production capacity of 1.3 million barrels of oil equivalent per day and is expected to be accretive to free cash flow within a year of the acquisition. The combined company will generate $3.5 billion in free cash flow through $2.0 billion of annual cost synergies and $1.5 billion of annual capital reductions.
Price Performance
Shares of Occidental Petroleum have underperformed the Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.