The Delaware Basin is in Texas and New Mexico. On Monday, Occidental Petroleum Corp. said it had agreed to sell parts of it to Permian Resources Corp.
PR 0.10% for around $818 million. The energy giant said it had sold other assets worth a total of $152 million. Warren Buffett’s Berkshire Hathaway Inc. BRK.B 0.05% owns a 29% share in the company, which is worth about $15 billion.
Occidental OXY -0.35%, based in Houston, said that the $970 million in proceeds would be used to pay down debt as part of a previously announced $4.5 billion to $6.0 billion divestiture program. The program is set to end 18 months after the closing of the acquisition of CrownRock L.P., which is expected to happen in August.
Last December, Occidental said it would buy CrownRock, an oil and gas company in the Midland, for $12 billion.
Statistics from FactSet show that the company owes more than $17 billion.
“We are pleased with the significant progress we have made so far on our divestiture program,” Occidental CEO Vicki Hollub said in prepared comments. “Our goal is to lower the risk of financing the CrownRock acquisition and speed up our path to shareholder return.”
The company is selling around 27,500 net acres in the Barilla Draw Field of the Texas Delaware Basin and around 2,000 net acres in the New Mexico Delaware Basin. The total net production for the fourth quarter is expected to be around 15,000 barrels of oil equivalent per day. The deal should go through in the third quarter.
Analysts at TD Cowen said that Ecopetrol, a partner in the Midland joint venture, could choose to take a 30% share in the CrownRock deal. This would bring in $3.6 billion, which would be enough to meet Occidental Petroleum’s asset sale goals.
Analysts led by David Deckelbaum wrote in a note to clients Monday that the situation should be watched closely because Ecopetrol has the right to buy up to 49% of the assets under the terms of the joint venture.
CrownRock will give Occidental Petroleum an extra 170 Mboed of potential output and 1,700 undeveloped sites.
The stock was down 0.4% but is now up 1.4% for the year, while the S&P 500 SPX 0.51% has gained 14.5%. TD Cowen rates the stock as a buy.
