Occidental Petroleum (Oxy) is selling its chemical unit, OxyChem, to Berkshire Hathaway in an all-cash deal valued at $9.7 billion.
Oxy said it will use $6.5 billion of the proceeds, subject to price adjustments, to reduce debt to below the $15 billion target it set after announcing its CrownRock acquisition in 2023.
OxyChem produces commodity chemicals used in sectors such as water treatment, pharmaceuticals, healthcare, and commercial and residential construction.
“This transaction strengthens our financial position and catalyzes a significant resource opportunity we’ve been building in our oil and gas business for the last decade,” said Vicki Hollub, CEO of Oxy, in the announcement. “I’m incredibly proud of the impressive work the team has done to create this strategic opportunity that will unlock 20-plus years of low-cost resource runway and deliver meaningful near and long-term value.”
In an investor presentation published after the announcement, Oxy said a greater emphasis on its oil and gas business will help maximize its resource potential. The company outlined plans to target a new bench in the Delaware Basin and highlighted its expansion into the Barnett formation of the Midland Basin.
The Houston-based operator also said it is advancing its unconventional enhanced oil recovery (EOR) program from the pilot stage to commercial scale. Oxy has previously shared plans to use CO2 obtained using direct air capture for unconventional EOR. In addition, the company intends to launch waterflooding projects in its Gulf of America position and will evaluate exploration opportunities in that region as well as in the international offshore market.
Oxy said a subsidiary will retain OxyChem’s legacy environmental liabilities, with a separate holding company overseeing existing remedial projects tied to that subsidiary.
Berkshire holds about 27% of Oxy’s stock, making it the company’s largest shareholder.
“Berkshire is acquiring a robust portfolio of operating assets, supported by an accomplished team. We look forward to welcoming OxyChem as an operating subsidiary within Berkshire,” said Greg Abel, vice chairman of non-insurance operations at Berkshire.
The transaction is expected to close by yearend, pending regulatory approvals and other customary closing conditions.