business

Occidental Said to Seek Buyer for $3 Billion Bakken Asset

Updated on

Occidental Petroleum Corp., the U.S. oil producer that is restructuring to focus on its most profitable operations, is seeking to sell oil assets in North Dakota for as much as $3 billion, people with knowledge of the matter said.

Occidental is working with investment bank Tudor Pickering Holt & Co. to sell about 335,000 net drilling acres in the Williston Basin, said the people, who asked not to be identified because they were discussing private information. The holdings include a part of North Dakota’s Bakken formation, an area that has been less successful for Occidental because of higher costs, though it’s one of the fastest-growing oil-producing regions in the U.S.

“This is mostly undeveloped acreage,” Pavel Molchanov, an analyst at Raymond James & Associates Inc., said today in a telephone interview. “In the context of Occidental, this is definitely not core acreage. The company has not historically played in the Bakken.”

The $3 billion potential price tag is possible to achieve, although it depends on the quality of Occidental’s land and whether it’s in the formation’s “sweet spot,” Molchanov said.

A representative for Tudor Pickering Holt didn’t respond to a request for comment. Melissa Schoeb, an Occidental spokeswoman, said the Houston-based company announced plans last year to “pursue strategic alternatives” for some assets, including in the Williston Basin.

Renewing Focus

Global energy producers are facing investor demands to cut spending and focus on their best drilling opportunities in the U.S., where oil output reached the highest level in almost 30 years. Companies including Apache Corp. have relied on asset sales and spinoffs to fund share buybacks and boost returns.

An index of companies that focus exclusively on finding and producing oil and natural gas has declined 14 percent since July as crude prices weakened, falling last week to the lowest level in almost 18 months.

Occidental Chief Executive Officer Stephen I. Chazen has embraced a restructuring plan that includes selling part of Occidental’s Middle East business and spinning off the company’s California operations. Chazen told investors in July that he might accelerate plans to sell assets in what the company calls its “midcontinent” operations in the Piceance and Williston basins.

Midcontinent Production

Occidental produced the equivalent of 92,000 barrels of oil and gas a day in its midcontinent business in the second quarter. Natural gas made up about 55 percent of that output, which at the end of 2013 came from states including Kansas, Oklahoma, Colorado, North Dakota and Texas.

The company plans to spin off its California operations next month. It’s also trying to sell a stake of as much as 40 percent of its operations in the Middle East and North Africa, a stake that could be worth as much as $8 billion.

Occidental has fallen 1 percent since 2011 as energy companies on the Standard & Poor’s 500 Index have risen 28 percent, according to data compiled by Bloomberg. Shares have declined more than 5 percent since the start of July.

(Updates with comment from analyst in third paragraph.)
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