Occidental Petroleum is reportedly in negotiations to sell its subsidiary chemical arm, OxyChem, in a deal worth at least $10 billion as part of efforts to reduce its $24 billion debt burden. The sale, if it goes through, would be the company’s biggest divestment and would create one of the world’s largest standalone petrochemical companies.
According to the report, the deal could be announced within the coming weeks—unless there is a last-minute change in decision. It's worth noting that this is not the first divestment the Warren Buffett-backed company has done. According to Bloomberg, Occidental has been divesting assets in an effort to reduce debt.
Last year, OxyChem generated about $5 billion in revenue. But that's not enough to cover Occidental's debt which currently stands at around $24 billion—much of which stems from its past acquisitions (including the $55 billion Anadarko deal in 2019 and a $13 billion shale acquisition in 2023).
In the past year, the Houston-based company has sold off non-core assets worth about $4 billion and managed to reduce debt by $7.5 billion. The company said it's making “pleasing” progress on its divestiture and debt-reduction plans.
That said, nothing is finalized for now. The buyer for OxyChem has not been reviewed at this press release , and who knows, the deal could still fall apart. But FT report says the divestment is likely to be announced in the coming weeks.
It's also worth noting that the sale talk comes at a time when the Occidental’s shares have underperformed over the past 12 months. The company's share down nearly 8% over the past year, compared with a 15% gain in the S&P 500 amid falling oil prices and investor concerns over its heavy debt load.
At the same time, the petrochemical sector has faced shrinking profit margins due to a global supply glut, with new U.S. and Middle Eastern capacity and China’s growing domestic production adding to competitive pressures.
