Occidental Petroleum Corp. (OXY), the largest oil producer in the contiguous U.S., will sell a minority stake in its Middle East and North Africa operations and dispose of other assets to boost shareholder value.
The company also will sell a portion of its 35-percent investment in the general partner of Plains All-American Pipeline LP (PAA) for a pretax gain of $1.3 billion, Los Angeles-based Occidental said today in a statement.
“These are the first formal steps in our effort to streamline the business, concentrate in areas where we have depth and scale and improve overall profitability,” Chief Executive Officer Stephen Chazen said in the statement. “Our goal is to become a somewhat smaller company with more manageable exposure to political risk.”
Investor unrest over lackluster returns has prompted Occidental, Hess Corp., Apache Corp. and other energy companies to pursue breakup plans and asset sales. Chazen said in July that Occidental’s board would consider splitting off its business in California. Deutsche Bank AG analyst Paul Sankey said after a meeting with Chazen in May that Occidental would consider selling a 25 percent stake in its Middle East and North Africa operations.
The company said today it will pursue “strategic alternatives” for Mid-continent assets, including some in the oil-bearing Bakken Shale of North Dakota as well as in the Hugoton gas field in Kansas and the Piceance gas fields in the Rocky Mountains. Occidental holds 2.5 million acres of leases with reserves equivalent to 211 million barrels of oil in those areas.
Occidental, which produced the equivalent of more than 300,000 barrels a day of oil and natural gas outside the U.S. in the second quarter, saw its value fall for two consecutive years in 2011 and 2012, the worst performance in more than two decades. Proceeds from the asset sales announced so far will be “significant,” according to today’s statement.
Chazen gained more control over the company after shareholders ousted longtime Chairman Ray Irani in May. Occidental has operations in countries including Oman, Qatar, Iraq and Libya.
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