Vicki Hollub, president and CEO of Occidental Petroleum, took the microphone on August 8 and told M&A dealers, buyers and investors: “Some people think this is a fire sale, but it is not.”
Hollub was responding to questions during Oxy’s earnings call last week about Oxy’s Plan B to raise another $3.5 billion through asset sales after Colombian company Ecopetrol declined to take a 30 percent stake valued at $3.6 billion in Oxy’s newly acquired CrownRock LP portfolio.
Oxy told investors in December and ratings agencies this summer that it plans to reduce its debt by $4.5 billion to $6 billion within 18 months of closing its $12 billion CrownRock transaction on August 1.
Specifically, investors and rating agencies had expected a price increase of 30% for Ecopetrol.
Oxy is currently evaluating properties that it could bring to market to cover the balance of its debt repayment obligation.
Sunil Mathew, CFO, said in the conference call that the debt reduction target has actually already been achieved by 70% due to the early repayment of some loans, other assets worth $970 million and other instruments.
As for divestments, Hollub said, “We feel that if we were to talk in detail about what assets they would be, we would be jeopardizing our ability to maximize the value of those divestments. We’ve said before that we’re getting a lot of offers.”
In the meantime, “I can assure you that we have great confidence in our ability to achieve our debt reduction goals,” she said.
The potential list cannot yet be announced “because we have not yet made any decisions about what the next divestments will look like. We are still reviewing that.”
However, Hollub particularly praised Oxy’s “onshore portfolio,” saying: “We welcome the opportunity to monetize some of these assets at an attractive price.”
“Anti-USA”
Regarding the failed deal with Ecopetrol, Hollub said in the phone call: “We worked on this deal from March until last week and thought we were finished.”
“But Colombia’s President (Gustavo) Petro did not agree and made it clear to the world that he is against oil and gas, against fracking and against the United States,” Hollub said.
“And with those three strikes (against Oxy), he’s pretty much put Ecopetrol out of business. And that’s all you can tell from the news reports.”
The Colombian government owns 85.5 percent of Ecopetrol.
She added: “Unfortunately, there are others in the world like Petro, and in fact there are some in the United States like Petro, who believe that oil and gas should go away and that we should no longer be an industry,” she said. “But the reality is that oil and gas, as you know, will be needed for many decades to come.”
Oxy has a large CO2 Hollub said he had a sequestration plant under development that was of interest to Ecopetrol, “and wanted to be part of it.” However, a deal for a CrownRock stake did not materialize.
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Why sell a piece of CrownRock?
A securities analyst asked why, if the CrownRock property is as good as it is described, Oxy would be the first to sell off some of the new premium?
Hollub explained that a joint venture (JV) between Oxy and Ecopetrol in the Midland Basin requires both companies to offer each other 49% of everything they acquire in the Midland Basin in a specific area of mutual interest.
Hollub said Oxy didn’t actually want to part ways with CrownRock. “Of course we wanted everything, they wanted a piece of it.”
Meanwhile, the CrownRock property is “one of the best we have ever seen.” The inventory of wells is rated as Level 1 by Oxy and the industry in general.
Oxy wanted to buy 100% and informed Ecopetrol of this, but was obliged to offer a portion to Ecopetrol.
Another analyst asked whether Oxy would then buy Ecopetrol out of the joint venture.
Hollub said a split would simply mean that Oxy would be the operator of the jointly owned plant with 51 percent and Ecopetrol with 49 percent.
Oxy’s net production in the joint venture established in 2019 is approximately 40,000 boe/d.
