Occidental Sells OxyChem to Berkshire Hathaway for $9.7 Billion
Occidental Petroleum has announced a significant decision to sell its chemicals division, OxyChem, to Berkshire Hathaway for $9.7 billion. This move marks the company’s largest divestment aimed at reducing its substantial debt burden following a series of costly acquisitions.
Details of the OxyChem Sale to Berkshire Hathaway
The divestiture comes as Occidental seeks to streamline its operations and focus on its core oil and gas business. The OxyChem unit, known for producing essential chemicals for applications like swimming pool treatment and medical supplies, reported revenues of $2.42 billion in the first half of 2023.
Financial Implications
Occidental plans to allocate $6.5 billion from the sale proceeds towards debt reduction. This move is critical, as the company faced a debt load of $23.34 billion as of June 2023. The sale will help bring total principal debt below Occidental’s $15 billion target established after acquiring CrownRock last year.
Impact on Berkshire Hathaway’s Portfolio
- This acquisition marks Berkshire’s largest since the $11.6 billion purchase of Alleghany Corporation in 2022.
- The deal will expand Berkshire’s chemical portfolio beyond its existing Lubrizol operations.
Occidental’s Strategic Refocus
The sale of OxyChem not only signifies a financial restructuring but also represents a strategic pivot for Occidental. CEO Vicki Hollub emphasized that this divestiture will enable the company to “unlock 20-plus years of low-cost resource runway” within its oil and gas operations, which comprised 75% of its total earnings last year.
Previous Acquisitions and Debt Challenges
Occidental’s acquisitions, particularly the $55 billion purchase of Anadarko Petroleum, have substantially increased its debt. The company has steadily pursued asset sales to alleviate this financial strain, including $950 million in additional divestitures disclosed in August.
As Occidental moves closer to finalizing this transaction in the fourth quarter, analysts remain cautious about its implications for future cash flow growth. Despite the potential short-term effects, the company’s strategic focus appears firmly set on enhancing its oil and gas business.
