Oxy to make Western Midstream independent

Company reduces its ownership, cuts debt

Occidental Petroleum said Monday it will reduce its ownership stake in its pipeline unit, Western Midstream Partners, and make it an independent company as Oxy moves to cut its debt.

Oxy, based in Houston, acquired Western as part of its $38 billion purchase of Anadarko Petroleum of The Woodlands last year. At the time, the sale of Western was considered one of the best ways for Oxy to help pay down the debt it assumed in the merger. Western’s market value, however, plunged by about 30 percent, putting any possible sale on hold. Western’s stock market value is about $10 billion.

Oxy said it will reduce its roughly 55 percent stake in Western to below 50 percent this year and make the pipeline firm fully independent. The deal would let Oxy take Western’s debt off of its books and still allow Oxy to maintain an operational relationship with Western and its pipelines and processing capabilities.

“We repaid $7 billion of debt less than five months after closing our acquisition of Anadarko and will continue to reduce debt in 2020 with proceeds from asset divestitures and free cash flow,” Oxy Chief Executive Vicki Hollub said.

Asset sales, cost cutting and debt reduction are key focuses for Oxy as it tries to woo back investors critical of Oxy’s dogged pursuit of Anadarko and the price it paid. In taking on so much debt — roughly $40 billion — Oxy made an expensive bet that oil prices would stay healthy in the future.

To make the Anadarko deal happen, Oxy had to outbid the much larger Chevron, taking out new loans and assuming Anadarko’s debt load. Oxy also made a deal with Warren Buffett’s Berkshire Hathaway to secure a $10 billion investment to help finance the deal, allowing Oxy to offer nearly 80 percent of its bid in cash.

Just last week, Oxy said it would sell the twin-tower, former Anathe darko headquarters in The Woodlands — while leasing back one tower — and the old ConocoPhillips campus in the Houston Energy Corridor for a combined $565 million to the Howard Hughes Corp. to help further reduce Oxy’s debt. Oxy had originally intended to move its headquarters to the Conoco campus but nixed those plans after buying Anadarko, deeming the campus too small to accommodate everyone.

Instead, Oxy will maintain a presence in The Woodlands as well as its headquarters in Greenway Plaza.

Oxy has a target of $15 billion in asset sales by mid-2020. The biggest part of Oxy’s debt reduction thus far is the ongoing $8.8 billion sale of Anadarko’s Africa assets to

French energy major Total, including a massive liquefied natural gas development and export project in Mozambique.

Oxy also formed a joint venture with Colombia’s state-owned oil company Ecopetrol to develop nearly 100,000 net acres in the Permian’s more mature Midland Basin. Ecopetrol will pay Oxy $750 million up front and carry another $750 million in capital into the partnership.

Oxy planned to put the first chunk of cash toward debt reduction.

Occidental Petroleum’s stock rose $1.44, or 3.3 percent, to close at $45.05 a share Monday.