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This post was last edited by Jinma Water Damage Control on 2025-10-11 at 09:09. U.S. oil giants are undertaking a “downsizing effort” to pay off the massive debts incurred from their reckless acquisitions years ago. Recently, according to the Financial Times, citing people familiar with the matter, Occidental Petroleum is in talks to sell its petrochemical subsidiary OxyChem, in a deal valued at at least $10 billion. This will be the largest asset divestiture in the company’s history. If the deal goes through, one of the largest independent petrochemical companies in the world will be created. Behind this sale lies a massive debt crisis that began in 2019. 01. The debt woes behind the asset sales: OxyChem, a subsidiary of Western Oil, is one of the major chemical manufacturers in the United States, operating in key areas such as chlor-alkali and vinyl products. This business has long provided Western Oil with stable cash flows. According to people familiar with the matter cited by Bloomberg, Berkshire Hathaway, the company led by “Oracle of Omaha” Warren Buffett, is in talks with Occidental Petroleum regarding a potential $10 billion acquisition of OxyChem. The deal could be announced in the coming days. Going back to 2019, a sensational acquisition battle within the energy industry unfolded quietly. On April 12 of that year, Chevron, the second-largest oil company in the United States, announced that it would acquire Anadarko Petroleum for $33 billion. But soon after, Occidental Petroleum made a surprise entry into the fray. With a higher bid of $38 billion and a cash payment ratio of 78%, it successfully outbid Chevron. Considering Anadarko’s debts, the total value of this acquisition amounts to $57 billion. Although this bold gamble enabled Western Oil to acquire nearly 250,000 acres of high-quality land in the Permian Basin from Anadarko, it also imposed a heavy burden. After the acquisition, Western Oil’s new debt amounted to approximately $46 billion. This caused the company’s stock price to drop to its lowest level in a decade. Rating agency Moody’s Investor Services warned at the time that it might lower Western Oil’s rating. Following the acquisition, Western Oil stated it planned to sell assets worth $10 billion to $15 billion in order to reduce its debt. Faced with massive debt, Occidental Petroleum has been continuously carrying out an asset divestment program in recent years. First is the sale of high-value non-core assets. In 2020, Anadarko sold its African assets to Total for $800 million; in 2021, it realized $4.2 billion by divesting some of its oil and gas assets in the Middle East; in 2022, it received $1.7 billion from the sale of chemical terminals on the U.S. Gulf Coast; and in 2023, it earned around $200 million from the sale of non-core assets in the Permian Basin. In the past three years, a total of over $13 billion in funds has been repatriated, and debt has been reduced to $32 billion. The sale of OxyChem’s chemical business is a continuation of this strategy. As the company shifted its strategic focus toward energy exploration, shale oil, and investments in low-carbon technologies, its chemical business was gradually viewed as an asset that could be sold. If this divestiture is successful, it will generate substantial cash for Western Oil, helping to improve its financial position. 02. The Battle of Giants: The outcome of that acquisition battle in 2019 had vastly different effects on the parties involved. For Chevron, although the acquisition failed, it turned out to be a blessing in disguise. Under the agreement, Anadarko paid Chevron about $1 billion in breakup fees. Chevron subsequently invested this amount in a share repurchase program, and its stock price rose by 3.69% after the announcement of the abandonment of the acquisition. Through continuous asset sales, Western Oil Company’s debt has dropped from $48.75 billion in September 2019 to around $24 billion. Foreign media reports indicate that the sale of OxyChem is expected to bring its debt level below $20 billion, aligning with its strategic adjustments and reflecting that its business focus remains on oil and natural gas. Data shows that in 2024, 75% of Occidental Petroleum’s profits came from the oil and gas sector. Vicki Hollub, President and CEO of Western Oil Company, described the deal as a way to “kick off a period of over 20 years of low-cost resource development” in its core upstream business, adding, “This transaction will strengthen our financial position, and I’m very excited about it.” ” For Buffett, he is currently the largest shareholder of Western Oil Company, holding 27% of its shares. If the deal goes through and OxyChem is acquired, it will not only strengthen Berkshire Hathaway’s control over Western Oil Company but also enhance Berkshire’s chemicals business segment, allowing for complementarity with Lubrizol and an expansion of its operations beyond oil and gas. Regarding the prospects for the deal, The Financial Times cited banking industry sources stating that private equity firms Blackstone and KKR, as well as the petrochemical giant LyondellBasell, have expressed interest. However, a valuation of $10 billion could pose difficulties in the negotiations, with Berkshire Hathaway, owned by Warren Buffett, potentially becoming the biggest buyer. Greg Abel, Vice Chairman of Berkshire Hathaway’s non-insurance businesses, said, “Berkshire is acquiring a solid portfolio of operating assets backed by outstanding teams.” We welcome OxyChem as Berkshire’s operating subsidiary. ”