Occidental Should Hit $15 Billion Debt Target With OxyChem Sale - Bloomberg

Occidental Should Hit $15 Billion Debt Target With OxyChem Sale - Bloomberg

Occidental Petroleum has announced a significant deal that could help the company achieve its debt reduction targets. The company has agreed to sell its petrochemical division, OxyChem, to Berkshire Hathaway for $9.7 billion in cash. This deal, if finalized, is expected to help Occidental reduce its debt and refocus on its core oil and gas business.

The sale of OxyChem, which produces chemicals used for treating swimming pools and vinyl products used for water supply piping and medical supplies, is part of Occidental's broader strategy to strengthen its balance sheet. The company has been grappling with a massive debt load, a legacy of its $55 billion acquisition of Anadarko Petroleum in 2019 and the $12 billion acquisition of CrownRock last year. Occidental's debt stood at $23.34 billion by the end of June.

Occidental plans to use $6.5 billion of the proceeds from the sale to reduce its debt, aiming to bring its total principal debt below the $15 billion target set after the CrownRock deal. The company has already divested approximately $4 billion in assets and set a goal of reducing its senior debt to less than $15 billion since 2023.

The deal is expected to close in the fourth quarter of 2025 and will be Berkshire's largest acquisition since it paid $11.6 billion for insurer Alleghany in 2022. Berkshire Hathaway, which holds about 27 per cent of Occidental's outstanding shares, began acquiring a stake in the company in February 2022, around the time Russia invaded Ukraine.

While the sale is a positive step for Occidental, some analysts have expressed concerns about the potential impact on future cash flow growth and the perceived undervaluation of the sale. However, Occidental's strategic positioning is crucial as it navigates the complexities of the energy market.