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Occidental to Sell $1.33B Assets as Part of Divestment Goal
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Occidental Petroleum (OXY - Free Report) announced that it has entered into an agreement to divest its Wyoming, Colorado, and Utah Land Grant assets to Orion Mine Finance (Orion) for nearly $1.33 billion. This deal, which is expected to close in fourth-quarter 2020, includes the company’s 4.5 million mineral acres and 1 million fee surface acres. The agreement does not include nearly 2.5 million mineral acres derived from the land grant in Colorado, including Occidental’s core DJ Basin position.
This deal in a way will assist the company to meet the $2 billion non-core asset divestment target set for 2020. The net proceeds from the deal will help Occidental meet debt obligations and fund growth projects. When TOTAL SE cancelled the agreement to acquire the remaining part of Occidental’s Africa assets, it created serious challenges for the latter to find a new buyer amid declining commodity prices.
Occidental’s Debt Burden
Occidental had to borrow funds to complete the buyout of Anadarko and beat Chevron Corporation (CVX - Free Report) in the acquisition race. As it has a huge debt in the balance sheet, it has started selling the less-profitable assets and those that are not in line with its long-term growth objectives, along with utilizing proceeds to repay debts. Occidental has been efficiently lowering debt since the acquisition of Anadarko. It exited the second quarter with a long-term debt of $36,774 million, down from $39,391 million at 2019-end.
In the 2021-2022 time period, Occidental will have to repay debt worth $11.1 billion. However, the current weak commodity price scenario and drop in the demand for hydrocarbons due to the pandemic outbreak is making it difficult to achieve the target.
Even amid the current situation, the company went ahead with the divestiture program and closed the sale of its Greater Natural Buttes asset in Utah during the second quarter. The company has decided to sell more non-core assets to lower debt burden and plans to divest another $2-$3 billion in first-half 2021. It prefers to wait for serious buyers who will ensure that Occidental gets the full value of its assets, rather than those that are willing to purchase them at a discount.
Price Performance
Occidental’s shares have underperformed the industry in the past 12 months.
Cactus delivered an average surprise of 12.21% in the last four quarters. The Zacks Consensus Estimate for 2020 earnings has moved 46.7% upward in the past 60 days to 44 cents per share.
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A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
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Occidental to Sell $1.33B Assets as Part of Divestment Goal
Occidental Petroleum (OXY - Free Report) announced that it has entered into an agreement to divest its Wyoming, Colorado, and Utah Land Grant assets to Orion Mine Finance (Orion) for nearly $1.33 billion. This deal, which is expected to close in fourth-quarter 2020, includes the company’s 4.5 million mineral acres and 1 million fee surface acres. The agreement does not include nearly 2.5 million mineral acres derived from the land grant in Colorado, including Occidental’s core DJ Basin position.
This deal in a way will assist the company to meet the $2 billion non-core asset divestment target set for 2020. The net proceeds from the deal will help Occidental meet debt obligations and fund growth projects. When TOTAL SE cancelled the agreement to acquire the remaining part of Occidental’s Africa assets, it created serious challenges for the latter to find a new buyer amid declining commodity prices.
Occidental’s Debt Burden
Occidental had to borrow funds to complete the buyout of Anadarko and beat Chevron Corporation (CVX - Free Report) in the acquisition race. As it has a huge debt in the balance sheet, it has started selling the less-profitable assets and those that are not in line with its long-term growth objectives, along with utilizing proceeds to repay debts. Occidental has been efficiently lowering debt since the acquisition of Anadarko. It exited the second quarter with a long-term debt of $36,774 million, down from $39,391 million at 2019-end.
In the 2021-2022 time period, Occidental will have to repay debt worth $11.1 billion. However, the current weak commodity price scenario and drop in the demand for hydrocarbons due to the pandemic outbreak is making it difficult to achieve the target.
Even amid the current situation, the company went ahead with the divestiture program and closed the sale of its Greater Natural Buttes asset in Utah during the second quarter. The company has decided to sell more non-core assets to lower debt burden and plans to divest another $2-$3 billion in first-half 2021. It prefers to wait for serious buyers who will ensure that Occidental gets the full value of its assets, rather than those that are willing to purchase them at a discount.
Price Performance
Occidental’s shares have underperformed the industry in the past 12 months.
Zacks Rank & Key Pick
Currently, Occidental carries a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is Cactus Inc. (WHD - Free Report) , having a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cactus delivered an average surprise of 12.21% in the last four quarters. The Zacks Consensus Estimate for 2020 earnings has moved 46.7% upward in the past 60 days to 44 cents per share.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>