Occidental Petroleum considers $20 billion sale of western midstream amid debt concerns

Occidental Petroleum, a major player in the energy sector, is reportedly exploring the sale of Western Midstream Partners, a natural gas-focused pipeline operator valued at close to $20 billion, including debt.

The potential divestment aims to alleviate Occidental's substantial debt burden, which has accumulated due to recent acquisitions, including the $12 billion purchase of CrownRock in December.

Sources familiar with the matter revealed that Occidental's move to sell Western Midstream is part of a broader strategy to streamline its operations and reduce its debt load.

Occidental's acquisition spree, including the $54 billion takeover of Anadarko Petroleum four years ago, has significantly increased its debt, prompting the need for asset sales to restore financial stability.

Commenting on Occidental's debt reduction strategy, a spokesperson for the company emphasised the importance of divesting non-core assets to achieve its goal of reducing debt to below $15 billion.

The completion of the CrownRock deal is crucial for Occidental's plans, which may influence its decision regarding the sale of Western Midstream.

Despite Occidental's debt concerns, Western Midstream's potential sale has sparked investor interest, with shares of the pipeline operator surging by 5.7 per cent on the news.

However, Occidental's stock experienced a slight decline amid broader downturns among energy producers

JPMorgan Chase is reportedly advising Occidental on the potential sale of Western Midstream, aiming to maximize the value of the company's ownership stake.

The divestment is expected to attract interest from major industry players, including Enterprise Products Partners, Williams Companies, and Kinder Morgan, as well as private equity firms and infrastructure funds.

Western Midstream, which operates approximately 16,000 miles of pipelines primarily in key oil and gas producing regions such as the Permian basin and the Denver-Julesburg basin, is seen as an attractive asset in the current market environment.

However, no deal is guaranteed and Occidental and its advisors are proceeding cautiously.

The potential sale of Western Midstream comes amid increased deal activity in the pipeline sector, with companies seeking to optimise their portfolios and gain access to lucrative oil and gas regions.

Deal-making in the pipeline sector has intensified in recent months, with notable transactions including ONEOK's acquisition of Magellan Midstream, Energy Transfer's takeover of Crestwood Equity Partners, and Sunoco's agreement to acquire NuStar Energy.

(With inputs from Reuters)