OCCIDENTAL SELLS $ 8 BLN
Occidental Petroleum Corp. (OXY)'s effort to raise as much as $8 billion by selling a stake in its Middle Eastern business has ended without a deal, people with knowledge of the matter said, and the company is now seeking to shop smaller pieces.
Occidental had been trying to sell 40 percent of the operations to a group comprising the governments of Oman, Abu Dhabi and Qatar, people have said, to raise cash for drilling and share buybacks.
The company now plans to sell some assets piecemeal, which will likely yield smaller proceeds than originally envisioned, two of the people said, asking not to be identified as the information is private. Occidental may fetch as much as $1 billion for smaller, partial sales, one of the people said.
"The $8 billion was never intended as a hard-and-fast rule for what they have to follow," said Pavel Molchanov, an analyst for Raymond James in Houston. "They always had the option of going piece by piece, retaining more of one asset versus another."
The Middle East sale is part of a breakup plan unveiled more than a year ago that's aimed at boosting Occidental's share price. Chief Executive Officer Stephen Chazen handled talks with sovereign wealth funds and possible strategic partners for the minority stake himself, people said in September.
Abu Dhabi's Mubadala Development Co. and Oman Oil were seeking to buy the stake, people with knowledge of the matter had said. While the group initially also included Qatar Petroleum, a political rift between Qatar and other Gulf nations over support for the Muslim Brotherhood imperiled that partnership.
In March, CEO Chazen told investors at a conference that the oil and gas producer may need to break up the assets and sell them to individual countries because of the tensions.
"At least to the investor base, it was widely telegraphed that this one deal was off the table," said Sameer Uplenchwar, an analyst for Global Hunter Securities in Calgary who has a neutral rating on the stock and owns no shares.
In April, people with knowledge of the matter said that Qatar had left the group and was considering bidding for the 40 percent stake on its own. All three bidders have since walked away from the group, the people said.
Occidental's shares have gained about 20 percent since April 25, 2013, when the company said it would consider a breakup. The stock closed at $102.24 yesterday, giving the company a market value of $80.3 billion.
The Middle East accounts for more than a third of Occidental's worldwide oil and gas production with developed and undeveloped assets of more than 5 million acres, according to information on the oil producer's website. Occidental holds a 40 percent interest in Al Hosn Gas Project in the United Arab Emirates, one of the largest natural gas fields in the region. It also holds a stake in the Dolphin Energy gas project.
Citigroup Inc.'s role as the sole adviser to the Gulf-based consortium ended after the talks stalled, the people said. The U.S. bank may end up advising one of the interested parties in a revamped sale, the people said.
"We continue to make progress on our discussions with our partners in the Middle East for the sale of a portion of our interests in the region," Melissa Schoeb, a spokeswoman for Occidental, said in an e-mailed statement.
Representatives for Mubadala, Qatar Petroleum and Oman Oil couldn't immediately be reached outside of regular business hours. A spokesman for Citigroup declined to comment.
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Product exports have grown significantly over the past several years and are expected to continue to grow as Russian refineries add capacity to produce more high-quality products.