Oxy Will Sell Bulk of Its Natural Gas Liquids Business
In the first major sale of assets since patriarch Armand Hammer’s death last year, Occidental Petroleum Corp. said Monday that it has agreed to sell most of its natural gas liquids business to a joint venture with Dallas-based Hicks, Muse & Co. in a deal that will net it about $432 million.
Occidental would retain half ownership of the joint venture, Trident Energy Inc., and would continue to operate the business that produces propane, ethane, natural gasoline, butane and other liquids, a spokesman said.
Proceeds of the proposed sale, part of an ambitious restructuring program undertaken after Hammer’s death last December, will go a long way toward meeting the company’s goal of eliminating $3 billion of its more than $8 billion of long-term debt.
“This transaction allows us to take a significant amount of cash out of the natural gas liquids business while retaining a 50% ownership position,” said Oxy Chairman Ray R. Irani in a statement.
“This is an ingenious transaction,” said Eugene Nowak, an industry analyst with Dean Witter Reynolds. “It confirms that the company is proceeding on a very positive course to dispose of assets.”
Under terms of the proposed deal, Occidental’s Oxy USA Inc. unit will sell assets in Kansas, Oklahoma, Texas and Louisiana--including 40 gas processing plants, four pipelines, more than 20 million barrels of storage capacity and a marine terminal--for $691 million, with Hicks Muse assuming $9 million of debt.
The assets will be placed into a joint venture. Occidental and Hicks Muse--which specializes in leveraged buyouts--will each pay $100 million into the venture for a half share.
The rest of the transaction is to be financed with debt that won’t be reflected on Hicks’ or Occidental’s balance sheets, company officials said.
The deal is subject to finding financing.
Thomas O. Hicks, chairman of Hicks Muse, said the deal fit in with the company’s long-term strategy. “We identified gas liquids as an attractive niche business a year ago,” he said in a statement.
Trident Energy will agree to supply 30% of the venture’s annual production to provide feedstocks for Occidental’s chemical plant at Lake Charles, La.
In addition, Occidental will retain other natural gas assets that are critical to its ongoing exploration and production operations, Occidental said.
The sale is the latest and largest of a series of deals that Occidental, under Irani, has entered to pare debt and focus the company on its core oil, natural gas and chemicals operations.
The company has so far netted $68 million from sales of assets.
Those include sales of a 5.4% interest in Church & Dwight, makers of Arm & Hammer baking soda; a half interest in a natural gas liquids terminal in Antwerp, Belgium, and the company’s phosphate and phosphoric acid business.
