Occidental Petroleum Corporation (NYSE: OXY) has announced a major divestiture deal, agreeing to sell key assets in the Delaware Basin to Permian Resources (NYSE: PR) for approximately $818 million. This strategic move, part of Occidental’s broader $4.5 billion to $6 billion divestiture program, is aimed at reducing debt and optimizing its financial position ahead of the anticipated acquisition of CrownRock, L.P. The transaction is set to close in the third quarter of 2024, pending customary closing conditions.

Major Asset Sale and Financial Strategy

Occidental is offloading around 27,500 net acres in the Barilla Draw Field of the Texas Delaware Basin and 2,000 net acres in the New Mexico Delaware Basin. These assets, which are expected to contribute about 15,000 barrels of oil equivalent per day in net production for the fourth quarter of 2024, will significantly impact the company’s financial strategy. This sale aligns with Occidental’s broader goal to de-risk the financing of the CrownRock acquisition, scheduled for August 2024.

The proceeds from the Permian Resources sale, along with several other dispositions totaling approximately $152 million completed earlier in 2024, will be directed towards debt reduction. Occidental’s divestiture program, which aims to streamline operations and enhance shareholder returns, reflects a proactive approach to managing its balance sheet and operational focus.

Company Statements on the Transaction

Vicki Hollub, President and Chief Executive Officer of Occidental Petroleum, expressed satisfaction with the progress of the divestiture program. Hollub highlighted that these efforts are crucial for mitigating the financial risks associated with the CrownRock acquisition and accelerating shareholder value returns. She emphasized the company’s commitment to strengthening its financial position through strategic asset sales.

Michael L. Smith, Chief Executive Officer of Permian Resources, noted that the acquisition would bolster their position in the Delaware Basin, enhancing their production capabilities and overall portfolio. Smith’s comments underscore the strategic importance of the assets being acquired and the anticipated benefits to Permian Resources.

Transaction Details and Advisors

Occidental’s financial advisory was provided by RBC Capital Markets, LLC, while White & Case LLP served as the legal advisor for this transaction. These advisors played a crucial role in structuring and finalizing the sale to Permian Resources.

As Occidental moves forward with its divestiture program, the focus remains on optimizing its asset portfolio and managing debt effectively. The company’s strategy reflects a clear intention to enhance operational efficiency and shareholder value in the face of evolving market conditions.

Strategic Implications of Occidental’s Divestiture Program

The sale of these Delaware Basin assets is a significant step in Occidental Petroleum’s broader financial strategy. According to industry experts, this move not only aligns with Occidental’s immediate goals of debt reduction but also positions the company strategically for future growth. By focusing on high-value assets and optimizing its portfolio, Occidental demonstrates a commitment to operational excellence and shareholder value enhancement.

As Occidental continues its divestiture program, the ability to successfully integrate CrownRock and manage its financial obligations will be closely watched by investors and analysts alike. The effectiveness of these strategies in achieving long-term corporate goals will be crucial for Occidental’s sustained success.

  CrownRock, Occidental Petroleum, Permian Resources, RBC Capital Markets, Vicki Hollub, White & Case LLP