By: Joshua Mann – Houston Business Journal – Houston-based Occidental Petroleum Corp. (NYSE: OCY) is continuing its divestment campaign with a new $508 million deal.
Oxy agreed to that price tag for the sale of 25,000 net Permian Basin acres to Colgate Energy Partners III LLC, a Midland, Texas-based oil and gas producer. The acreage includes 10,000 barrels of oil equivalent per day from 360 wells, the company said in a press release.
Occidental sold its onshore assets in Colombia in 2020, and CEO Vicki Hollub said after that deal the company planned to announce another $2 billion to $3 billion in divestments. The Colgate deal brings Occidental’s total divestments since that statement to $1.3 billion, which means the company has a little more room before it reaches the low end of the target range.
In total, Occidental has divested more than $9 billion since the summer of 2019, when it acquired The Woodlands-based Anadarko Petroleum Corp. for $55 billion. At the time, the company said it wanted to sell $10 billion to $15 billion of its assets in the 24 months following that deal.
Once it hits that $10 billion goal, Occidental doesn’t plan to push further with large-scale divestments, Hollub said in November.
From Colgate’s perspective, this most recent deal is transformational, said Will Hickey, one of Colgate’s two CEOs. The new assets will be able to immediately compete for investment with the rest of Colgate’s portfolio, Hickey said in a Colgate statement.
“Given the proximity to our current assets, we are confident that we can leverage our ongoing operations to maximize the value of this acquisition for our investors,” Hickey said.
Colgate expects to be running a five- to six-rig program by the end of the year, bringing its total production for 2022 to about 75,000 barrels per day.
The transaction is set to close in the third quarter, the companies said. Occidental plans to use the proceeds from the sale to pay down debt.
Occidental employed 11,800 people at the end of 2020, down 18.1% from a year prior. The company produced revenue of $16.26 billion in 2020, down 25.24% from $21.75 billion in 2019, according to its most recent annual financial report.