Occidental Petroleum Corp. said Jan. 6 it would cut its majority stake in pipeline operator Western Midstream Partners LP to less than 50% in 2020, to reduce its debt that grew significantly with the Anadarko Petroleum deal.
Occidental's shares rose about 4% on the news, having lost over 30% in value since the $38 billion offer for Anadarko was made public on April 24, 2019.
RELATED:
Occidental’s Anadarko Acquisition Tops US Oil Deals Of Last Decade
The company is working to pare $40 billion of debt it took on with the Anadarko deal, and changes to ownership would ease a sale or spin-off of Western Midstream. The restructuring would also allow Occidental to no longer show the gas pipeline and processing business's debt as its own.
The net long-term debt for Occidental was $47.6 billion as of Sept. 31, 2019.
The deal, which has been called "hugely overpriced" by activist investor Carl Icahn, continues to weigh on Occidental's shares, which still trade at levels it touched during the financial downturn of 2008.
Inherited as part of the Anadarko takeover, the sale of the Western Midstream stake is a key part of Occidental's target to raise a total of $15 billion from asset sales by mid-2020.
Occidental has raised about $10.5 billion through sales of properties, including a LNG project in Mozambique and oil production elsewhere in Africa.
Western Midstream currently trades at a market value of over $9 billion.
The restructuring of the Western Midstream agreements will put Occidental back on track to hive off the business, something it tried to do unsuccessfully last year.
"I don't view the plans to reduce its ownership level to below 50% in 2020 as surprising. It's likely just a first step towards monetizing more of its ownership position over time," said Jennifer Rowland, an analyst with Edward Jones.
Occidental on Jan. 5 gave up over 9 million shares, or a 2% stake in Western Midstream's general partner, and allowed limited partners to remove Occidental and appoint a new general partner.
Occidental fully owns the general partner stake, which effectively controls Western Midstream, a MLP, and around 55% of the pipeline operator's limited partner units.
Western Midstream's limited partner units rose 3.6% to $21.54 on Jan. 6.
Recommended Reading
Bechtel Awarded $4.3B Contract for NextDecade’s Rio Grande Train 4
2024-08-06 - NextDecade’s Rio Grande LNG Train 4 agreed to pay Bechtel approximately $4.3 billion for the work under an engineering, procurement and construction contract.
SPATCO Energy Exits RF Investment Fund
2024-08-15 - RF investment Partners said it invested in SPATCO Energy Solution’s $230 million continuation fund, which was led by Kian Capital Partners and Apogem Capital.
CrownRock Offloads Oxy Shares Two Weeks After Closing $12B Deal
2024-08-15 - Underwriters of the offering agreed to purchase CrownRock’s Occidental stock at $58.15 per share, which will result in approximately $1.719 billion in proceeds before expenses.
Delek Logistics Offering Senior Notes to Pay Off Debt
2024-08-15 - Delek Logistics Partners and its subsidiary plan to use the net proceeds from the senior notes offering to pay off a portion of the outstanding borrowings from its credit facility.
Dividends Declared in the Week of Aug. 12
2024-08-16 - As second-quarter earnings season wraps up, here is a roundup of select upstream, midstream and service and supply companies’ dividends declared in the week of Aug. 12.