Occidental Petroleum Exploring a Sale of Western Midstream Partners

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.

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.

Western Midstream shares closed 5.7% higher at $30.81 on the news, their highest finish since July 2019. Occidental shares dropped 1.6% to $59.56, along with broad declines among energy producers.

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.

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.

Western Midstream said in a statement it was aware of Occidental's interest in selling assets and could not provide further details, directing questions to Occidental. It added that Western Midstream itself was not running a sale process.

A spokesperson for Occidental declined to comment.

JPMorgan declined to comment. Spokespeople for 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 Houston-based 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; Editing by David Gregorio)