Occidental explores $20 bln-plus sale of Western Midstream, sources say

Sunoco LP (Texas)

20/02/2024 17:44

(Updates  share price, paragraph 2)
    By David French and Anirban Sen
       Feb 20 (Reuters) - Occidental Petroleum  OXY.N  is
exploring a sale of Western Midstream Partners  WES.N , a U.S.
natural gas-focused pipeline operator that has a market value of
close to $20 billion, including debt, according to people
familiar with the matter.
        Western Midstream shares rose 10% to $32.12 in afternoon
trading in New York on Tuesday.  
  
    The divestment would help Occidental, which is backed by
Warren Buffett's Berkshire Hathaway  BRKa.N , slash the $18.5
billion debt pile it has accumulated because of acquisitions. 
    Occidental inked a deal in December to acquire oil and gas
producer CrownRock for $12 billion, an acquisition which would
add further borrowing, four years after its $54 billion purchase
of peer Anadarko Petroleum.
    Occidental owns 49% of Western Midstream and controls the
company's operations by also owning its general partner. Western
Midstream is structured as a tax-advantaged master limited
partnership, and a general partner is its controlling entity.
    Houston-based Western Midstream is working with Citigroup
 C.N  on a sale process, the sources said. JPMorgan Chase
 JPM.N  is advising Occidental on how to extract the most value
from its ownership of Western Midstream, the sources added.
    Western Midstream will likely attract interest from most of
its major peers, including Enterprise Products Partners  EPD.N ,
Williams Companies  WMB.N  and Kinder Morgan  KMI.N , the
sources said. It could also appeal to private equity firms and
infrastructure funds.
    The sources cautioned no deal was guaranteed and spoke on
condition of anonymity to discuss private deliberations.
Occidental last week reaffirmed its goal of reducing its debt to
below $15 billion, while saying divesting land it does not need
in the Permian basin would depend on completing its CrownRock
deal.
    Spokespeople for Western Midstream, Occidental, Citigroup,
JPMorgan, Enterprise Products, Williams Companies and Kinder
Morgan either declined to comment or did not immediately respond
to requests for comment.
    Western Midstream has around 16,000 miles of pipelines in
its network, as well as processing, treatment and other
facilities, with operations predominantly in the Delaware
portion of the Permian basin in Texas and New Mexico, as well as
the Denver-Julesburg basin in Colorado.
    The company was formed by Anadarko in 2007. Occidental set
up Western Midstream as a standalone company when it took over
Anadarko late in 2019. 
    Dealmaking in the pipeline sector has been picking up as
some companies look to cut costs while others seek more access
at scale to attractive oil and gas producing regions, including
the Permian basin, as well as export facilities on the U.S. Gulf
Coast. 
    Last year, ONEOK  OKE.N  bought Magellan Midstream for $18.8
billion including debt, while Energy Transfer  ET.N  took over
Crestwood Equity Partners for $7.1 billion including debt at the
start of November.
    Last month, Sunoco  SUN.N  agreed to acquire NuStar Energy
 NS.N  for $7.3 billion including debt.

 (Reporting by David French and Anirban Sen in New York; Editing
by David Gregorio)
 ((davidj.french@thomsonreuters.com;))