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Occidental to Streamline Operations with $20 Billion Western Midstream Sale?

Occidental considers selling Western Midstream for $20 billion to reduce its $19 billion debt.

The sale of Western Midstream could follow its expensive Anadarko acquisition.

FTC delays Occidental's $12 billion CrownRock purchase; company looks to sell pipeline assets.

Enterprise Products and Kinder Morgan are potential buyers for OXY's Western Midstream.

Occidental Petroleum is looking into selling Western Midstream Partners. OXY focuses on natural gas pipelines in the U.S. and is worth around $20 billion, including its debt. This sale could help the company cut down its large debt of $18.5 billion, which grew due to buying other companies. Recently, Occidental agreed to buy CrownRock for $12 billion, adding more debt to its books. This comes after its huge $54 billion purchase of Anadarko Petroleum four years ago.

The news about possibly selling Western Midstream made its shares go up by 5.7% to $30.81, reaching their highest value since July 2019. However, Occidental's shares fell by 1.6% to $59.56, as part of a wider drop among energy companies.

OXY owns 49% of Western Midstream and has control over it. Western Midstream operates in a way that gives it tax benefits. JPMorgan Chase is advising Occidental on this potential sale.

Big companies like Enterprise Products Partners, Williams Companies, and Kinder Morgan might be interested in buying Western Midstream. Private equity firms and infrastructure funds might also want to buy it. But, it's not sure if the sale will happen. Sources who know about these plans asked not to be named.

Occidental has recently said it wants to reduce its debt to below $15 billion. It also mentioned selling some land in the Permian basin, but this depends on whether the CrownRock purchase goes through. Western Midstream knows about Occidental's plans to sell some assets but didn't give more details. They mentioned that Occidental would be the one to talk to about this. Western Midstream also said it's not looking to sell itself right now.

JPMorgan has chosen not to comment on the matter. Similarly, spokespeople for Enterprise Products, Williams Companies, and Kinder Morgan have either declined to comment or have not yet responded to inquiries.

The pipeline sector has seen a flurry of deal activities recently, driven by some companies aiming to reduce expenses and others looking to expand their reach into lucrative oil and gas regions like the Permian Basin and access to export facilities along the U.S. Gulf Coast.

In the past year, there have been significant acquisitions within the pipeline industry. ONEOK acquired Magellan Midstream for $18.8 billion, including debt. Energy Transfer finalized its acquisition of Crestwood Equity Partners for $7.1 billion, including debt, at the beginning of November. Additionally, Sunoco announced plans to buy NuStar Energy for $7.3 billion, including debt, last month.

In line with its strategy, under Occidental's management, Western Midstream Partners LP made a significant move by acquiring Meritage Midstream Services II LLC for $885 million last year. This acquisition expanded Western Midstream's footprint in the Powder River Basin and increased its natural gas processing capabilities. To finance this acquisition, Western Midstream issued $600 million in 6.35% senior notes.

Occidental Petroleum has faced criticism for its high-stakes acquisitions, notably its purchase of Anadarko Petroleum, which investor Carl Icahn criticized as one of the worst he's seen, deeming it grossly overpriced. Despite the backlash, Occidental is optimistic about the future, anticipating a supply shortfall in the oil market as early as next year. This prediction is based on the industry's slow pace in replenishing crude reserves.

About Western Midstream

Western Midstream boasts a network comprising approximately 16,000 miles of pipelines, alongside various processing and treatment facilities. Its operations are primarily located in the Delaware area of the Permian Basin across Texas and New Mexico and the Denver-Julesburg Basin in Colorado. Originally established by Anadarko in 2007, Western Midstream became an independent entity under Occidental's stewardship following its acquisition of Anadarko in 2019.

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