Occidental Announces Successful Strategic and Financial Initiatives
January 06 2020 - 8:05AM
Business Wire
Enters into new service, operating and
governance agreements with Western Midstream
Divests real estate holdings for $565 million,
repays $2 billion of 2021 bank term loans in fourth quarter
Expands 2020 Oil Hedging Program to 350,000
BOED
Occidental Petroleum Corporation (NYSE:OXY) today provided an
update on its execution against key strategic and financial
initiatives designed to maximize shareholder value following the
close of its acquisition of Anadarko Petroleum ("Anadarko") on
August 8, 2019.
New Service, Operating and Governance
Agreements with Western Midstream
Occidental and Western Midstream Partners, LP (NYSE: WES) (“WES”
or the “Partnership”) announced the execution of several agreements
that enable WES to operate as an independent midstream company to
support its ongoing pursuit of third-party growth opportunities.
The executed agreements include amendments to the limited
partnership agreement that significantly expand unitholders’
rights, including the right to remove and replace Occidental as the
general partner. These amendments, along with other pertinent
agreements, including the transfer of the WES corporate officers’
employment from Occidental to the Partnership, result in
Occidental’s go-forward reporting of WES’s financial information
under the equity method of accounting. Accordingly, Occidental will
no longer consolidate WES’s statement of operations, balance sheet,
and statement of cash flows. These financial reporting changes will
provide increased clarity and transparency into the financial
performance of Occidental’s core businesses. Occidental intends to
continue its operational relationship with WES and expects to
maintain a significant economic interest in WES, which Occidental
will reduce to below 50% during 2020.
“Over the last few months, Occidental and WES have worked to
finalize agreements beneficial to both companies that establish WES
as an independent midstream company capable of successfully
competing for third-party business in its core areas of operation,”
said President and Chief Executive Officer Vicki Hollub. “We
believe that our shareholders and WES’s unitholders are positioned
to benefit from these new agreements.”
Key terms of the newly executed agreements include:
- Effective December 2019, employment of WES’s management team
was transferred from Occidental to WES to ensure independent
managerial control of WES’s strategic initiatives and day-to-day
operations.
- Occidental employees who were fully dedicated and seconded to
WES in December 2019 will be transferred to WES in 2020.
- Occidental will provide limited administrative services to WES
for up to two years.
- The rights of WES unitholders to replace WES’s general partner
under an amended limited partnership agreement were significantly
expanded.
- New long-term oil and gas gathering acreage dedications
covering approximately 21,000 acres in Weld County, Colorado,
supported by minimum volume commitments and complemented by
previously executed DJ Basin gas-processing dedications, will be
put in place.
Divestiture Program
With the recently announced sale of $565 million of Houston and
Woodlands real estate assets to the Howard Hughes Corporation,
Occidental continues to make progress towards meeting its $15
billion divestiture target. Occidental retired $2 billion of 2021
bank term loans in the fourth quarter of 2019 with proceeds from
asset divestitures and free cash flow.
"The sale of office complexes in the Houston Energy Corridor and
The Woodlands is part of our plan to divest non-core assets and
continue to improve the strength of our balance sheet," said
Occidental President and CEO Vicki Hollub. "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.”
Oil Hedging
Occidental increased its 2020 volume of hedged oil production by
50,000 barrels of oil per day (BOPD) to 350,000 BOPD representing a
significant portion of 2020 oil production. The incremental oil
hedges were structured as three-way costless collars to provide
enhanced cash flow in a low oil-price environment while preserving
significant upside in higher price scenarios. For every $1 increase
in oil prices, Occidental’s free cash flow increases by $260
million per annum. In a low oil-price environment, Occidental’s
2020 hedging program enhances cash flow to support its dividend
during the post-acquisition transitional period.
About
Occidental
Occidental is an international oil and gas exploration and
production company with operations in the United States, Middle
East and Latin America. We are the leading producer and largest
acreage holder in the Permian Basin. Occidental is advancing a
lower-carbon future with our subsidiary Oxy Low Carbon Ventures,
which promotes innovative technologies that drive cost efficiencies
and economically grow our business while reducing emissions. We
also have a marketing and midstream business. OxyChem, our chemical
subsidiary, is among the top three U.S. producers for the principal
products it manufactures and markets. Occidental posts or provides
links to important information on our website at oxy.com.
Forward Looking
Statements
This press release contains "forward-looking statements" within
the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, including but not limited
to statements about Occidental’s expectations, beliefs, plans or
forecasts. Forward-looking statements involve estimates,
expectations, projections, goals, forecasts, assumptions, risks and
uncertainties, many of which involve factors or circumstances that
are beyond Occidental’s control. Actual results may differ from
anticipated results, sometimes materially, and reported or expected
results should not be considered an indication of future
performance.
Factors that could cause actual results to differ and that may
affect Occidental’s results of operations and financial position
appear in Part I, Item 1A "Risk Factors" of Occidental’s Annual
Report on Form 10-K for the year ended December 31, 2018, and in
Occidental’s other filings with the U.S. Securities and Exchange
Commission ("SEC"). Additional factors related to the completed
transaction between Occidental and Anadarko appear in the
definitive proxy statement/prospectus that is a part of
Occidental’s registration statement on Form S-4, as amended, which
was declared effective by the SEC on July 11, 2019, in connection
with the completed transaction between Occidental and Anadarko.
Because the factors referred to above could cause actual results
or outcomes to differ materially from those expressed or implied in
any forward-looking statements, you should not place undue reliance
on any such forward-looking statements. Further, any
forward-looking statement speaks only as of the date of this
communication and, unless legally required, Occidental does not
undertake any obligation to update any forward-looking statement,
as a result of new information, future events or otherwise.
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version on businesswire.com: https://www.businesswire.com/news/home/20200106005530/en/
Media: Melissa E. Schoeb 713-366-5615 melissa_schoeb@oxy.com or
Investors: Jeff Alvarez 713-215-7864 jeff_alvarez@oxy.com On the
web: oxy.com
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