Occidental Petroleum Corp.'s plan to de-lever its balance sheet after completing its $55 billion acquisition of Anadarko Petroleum Corp. is on schedule, the company said Sept. 30.
In a statement released in conjunction with the closing of TOTAL SA's $3.9 billion purchase of LNG assets formerly held by Anadarko in Mozambique, Occidental said it remains on track to complete between $10 billion and $15 billion in planned asset sales. Nearly $5 billion of that amount should come from Total, which is still in the process of closing on Anadarko's former assets in Algeria, Ghana and South Africa.
Occidental said it has completed the sale of its holdings in Plains All American Pipeline LP and Plains GP Holdings LP for $650 million. It has also established a joint venture with Ecopetrol SA to develop acreage in the Midland Basin for $750 million in cash and $750 million in carried capital. That deal, the company said, should close by the end of 2019.
Buying Anadarko made Occidental one of the largest players in the Permian Basin. However, the acquisition also did significant damage to the company's balance sheet — one of its major selling points for investors. Occidental stock has dropped more than $21 since April 12, when it made its interest in Anadarko publicly known, hitting decade lows in the process. The addition of significant new debt is one of the main reasons activist investor Carl Icahn initially spoke out against the deal in late May, calling the price "sky high."
"They decided to go for growth-at-all-costs at the price of ballooning the Company's debt burden, rather than trying to maximize stockholder value prudently," Icahn said in a lawsuit intended to force Occidental to turn over its files related to the deal. "A board of directors giving priority to stockholder value would not have approved the Company's very high topping bid for Anadarko because most of that price will be paid for with debt."
While the suit did not stop the deal from closing, Icahn has since launched an insurgent effort to unseat four members of the company's board of directors.
In the Occidental statement, CEO Vicki Hollub reiterated her stance that the Anadarko deal would be beneficial for investors.
"We have made progress quickly on our post-acquisition divestiture and deleveraging goals and remain confident in our ability to realize the full value of the Anadarko acquisition for our shareholders," she said. "Upon completion of our recent initiatives, we will have reached approximately $10 billion of our targeted divestitures with more to follow."
In a commentary released Sept. 30, Goldman Sachs indicated that major investors remain divided on the Anadarko merger. There is also uncertainty on whether Hollub's promises of long-term benefit and a repaired balance sheet will come to fruition.
"There is still concern on leverage, though rising expectations for [free cash flow]. Investor response to management’s comments on synergies and asset sales timing were mixed, with some more negative that self-help operational improvement may push [Occidental's] plan to potentially divest [Western Midstream Partners LP] into 2020 and others more positive on management confidence in Permian productivity/efficiency improvements," the firm said.
Occidental stock on the New York Stock Exchange closed the Sept. 30 session at $44.47 per share, down 1.5% on the day.
