OXY

EXCLUSIVE-Occidental explores $20 bln-plus sale of Western Midstream, sources say

Credit: REUTERS/BRENDAN MCDERMID

By David French and Anirban Sen

Feb 20 (Reuters) - Occidental Petroleum OXY.N is exploring a sale of Western Midstream Partners WES.N, a U.S. natural gas-focused pipeline operator that has a market value of close to $20 billion, including debt, according to people familiar with the matter.

Western Midstream shares rose 10% to $32.12 in afternoon trading in New York on Tuesday.

The divestment would help Occidental, which is backed by Warren Buffett's Berkshire Hathaway BRKa.N, slash the $18.5 billion debt pile it has accumulated because of acquisitions.

Occidental inked a deal in December to acquire oil and gas producer CrownRock for $12 billion, an acquisition which would add further borrowing, four years after its $54 billion purchase of peer Anadarko Petroleum.

Occidental owns 49% of Western Midstream and controls the company's operations by also owning its general partner. Western Midstream is structured as a tax-advantaged master limited partnership, and a general partner is its controlling entity.

Houston-based Western Midstream is working with Citigroup C.N on a sale process, the sources said. JPMorgan Chase JPM.N is advising Occidental on how to extract the most value from its ownership of Western Midstream, the sources added.

Western Midstream will likely attract interest from most of its major peers, including Enterprise Products Partners EPD.N, Williams Companies WMB.N and Kinder Morgan KMI.N, the sources said. It could also appeal to private equity firms and infrastructure funds.

The sources cautioned no deal was guaranteed and spoke on condition of anonymity to discuss private deliberations. Occidental last week reaffirmed its goal of reducing its debt to below $15 billion, while saying divesting land it does not need in the Permian basin would depend on completing its CrownRock deal.

Spokespeople for Western Midstream, Occidental, Citigroup, JPMorgan, Enterprise Products, Williams Companies and Kinder Morgan either declined to comment or did not immediately respond to requests for comment.

Western Midstream has around 16,000 miles of pipelines in its network, as well as processing, treatment and other facilities, with operations predominantly in the Delaware portion of the Permian basin in Texas and New Mexico, as well as the Denver-Julesburg basin in Colorado.

The company was formed by Anadarko in 2007. Occidental set up Western Midstream as a standalone company when it took over Anadarko late in 2019.

Dealmaking in the pipeline sector has been picking up as some companies look to cut costs while others seek more access at scale to attractive oil and gas producing regions, including the Permian basin, as well as export facilities on the U.S. Gulf Coast.

Last year, ONEOK OKE.Nbought Magellan Midstream for $18.8 billion including debt, while Energy Transfer ET.Ntook over Crestwood Equity Partners for $7.1 billion including debt at the start of November.

Last month, Sunoco SUN.Nagreed to acquire NuStar Energy NS.N for $7.3 billion including debt.

(Reporting by David French and Anirban Sen in New York; Editing by David Gregorio)

((davidj.french@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.