Occidental Finalizes $9.7B Chemical Unit Sale to Berkshire Hathaway
Energy giant to use $6.5 billion of proceeds for accelerated debt reduction, pushing total principal below its $15 billion target.
Occidental Petroleum (NYSE: OXY) has completed the sale of its chemical division, OxyChem, to Warren Buffett’s Berkshire Hathaway in a deal valued at $9.7 billion in cash, marking a pivotal moment in the energy company's long-term deleveraging strategy.
Shares of Occidental responded positively to the news, closing up 1.23% at $41.63 in Tuesday trading. The company announced it will immediately deploy $6.5 billion of the proceeds to pay down debt, a significant step toward repairing the balance sheet loaded with leverage since its ambitious acquisition of Anadarko Petroleum in 2019.
That very acquisition was made possible by a $10 billion preferred-stock investment from Berkshire Hathaway, deepening a complex and profitable relationship between the two firms. Today, Berkshire stands as Occidental's largest shareholder, holding a stake of nearly 27%. This asset sale further cements the strategic ties between the Houston-based oil producer and the Omaha-based conglomerate.
In a statement confirming the transaction, Occidental President and CEO Vicki Hollub emphasized the strategic pivot enabled by the sale. "This sale accelerates our strategy to strengthen our balance sheet and focus on our core oil and gas portfolio," she said according to the company's official announcement. The move is designed to bring the company's total principal debt below its stated target of $15 billion, enhancing financial flexibility and reducing interest expenses.
With a market capitalization of approximately $40.5 billion, Occidental has been under pressure from investors to streamline its operations and address its debt load. The sale of the stable, cash-flow-generating chemical business represents a trade-off, sacrificing a diversified income stream for a much healthier financial position. Wall Street analysts appear to support the trade, with a consensus rating of 'Hold' to 'Buy' and an average price target of approximately $49.92, suggesting confidence in the deleveraging narrative.
The deal is structured with certain carve-outs. According to a regulatory filing, an Occidental subsidiary will retain legacy tort and environmental liabilities linked to historical operations, ensuring the newly acquired OxyChem is not encumbered by these past issues.
For investors, the transaction sharpens Occidental’s focus on its primary exploration and production activities, alongside its ambitious carbon capture, utilization, and storage (CCUS) projects. With a fortified balance sheet, the company is better positioned to navigate the volatile energy markets and invest in its long-term strategy of leading in low-carbon initiatives while maximizing its core oil and gas assets.