Occidental said to be seeking buyer for South Texas assets

By Laura Blewitt and Matthew Monks on 2/16/2017

NEW YORK (Bloomberg) -- Occidental Petroleum Corp. is working with Citigroup Inc. to handle the sale of about 180,000 acres of E&P assets that hug the border with Mexico in South Texas, according to people familiar with the plans.

After exiting its Eagle Ford non-operated properties last year, the Houston-based company is selling the rest of its South Texas assets, from wells to staffed offices, said the people, who asked not to be identified because the matter is confidential. The assets’ worth is estimated at $500 million or less, according to one person. Melissa Schoeb, a spokeswoman for Occidental, declined to comment by email. Citigroup spokesman Robert Julavits declined to comment by phone from New York.

Occidental has dropped 6.1% this year, surpassing the 4% decline on the S&P 500 Energy Index. The shares fell 0.4% to $66.95 at 11:59 a.m. in New York Wednesday.

Occidental has been selling assets in South Texas as it focuses on growth in the Permian. The 180,000 acres being put up for sale now represent about 3% of the company’s U.S. holdings. Most of the assets are in the Vicksburg shale, at least 500 miles from its Permian activity and in the deepest southern portion of the Texas-Mexico border.

CEO Vicki Hollub is concentrating on developing assets that deliver rates of return of at least 15% domestically. Overseas projects must generate at least 20% returns to warrant the company’s attention.

The company sold holdings in the Eagle Ford formation in September for $63 million. Its total South Texas footprint stretched across eight Texas counties, which Occidental is aiming to completely exit. Included in the sale is border acreage from Brownsville to Laredo in a shale area known for its high yields of condensate, a very light oil that is typically blended with heavy crude in Canada or Colombia. Occidental opened a crude export facility near Corpus Christi, Texas, last quarter, which is not for sale. The company will also sell the infrastructure it has developed in South Texas like pipelines and processing plants, staffed offices and mineral rights.

Occidental released its fourth-quarter earnings Feb. 9, which showed higher-than-expected losses. The company said last week its 2016 worldwide proved reserves rose 9% to 2.4 Bboe. Its proved reserves comprised of 56% crude, 17% natural gas liquids and 27% gas.

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