Occidental Petroleum Corporation (Oxy) announced it has executed an agreement with a subsidiary of China Petrochemical Corporation (Sinopec) to sell its Argentine oil and gas operations for after-tax proceeds of approximately US$2.5 billion.
Oxy also announced that it had executed agreements to purchase oil and gas properties in South Texas and North Dakota for about $3.2 billion. Additionally, Oxy announced that it has signed an agreement to increase its General Partner (GP) ownership in crude oil transport and storage specialist Plains All-American (PAA) to approximately 35%.
Oxy’s Argentine assets being divested currently produce approximately 44,000 BOEPD net to the company.
The company expects to complete all these transactions no later than the end of first quarter 2011.
“These transactions will be immediately accretive to our earnings, return on capital employed and cash flow after capital. With these new acquisitions and without Argentina in our asset mix, achieving both our short-term and long-term average annual production growth outlook of 5-8% will be more certain and will generate higher returns,” said Ray Irani, chairman and chief executive officer of Occidental Petroleum Corporation.
“These properties, combined with acquisitions completed earlier this year, will more than replace the production from the sale of Argentina. We expect that each of these new acquisitions together with future drilling, potential exploration and consolidation opportunities in these areas, over time, will grow to over 50,000 barrels of oil equivalent per day (BOEPD).”
The South Texas assets will be purchased from Shell for about $1.8 billion and currently produce approximately 200 million cubic feet per day of gas equivalent. Shell has owned and operated the properties for many years. The assets will be 100% operated by Oxy and have an excellent inventory of drilling opportunities.
Oxy is purchasing, from a private seller, approximately 180,000 net contiguous acres in North Dakota which produce from the Bakken formation and are prospective in the Three Forks formation. The purchase price is approximately $1.4 billion.
The assets currently produce approximately 5,500 BOEPD. Combined with Oxy’s other interests in the Williston Basin, the company will have an interest in over 200,000 net acres and over 6,000 BOEPD of production. Oxy expects to grow production in the Williston Basin to at least 30,000 BOEPD over the next five years.
Oxy is purchasing an incremental 13% ownership in PAA’s general partner, bringing its total ownership in the GP to approximately 35%. PAA’s operations compliment Oxy’s domestic oil and gas operations. Plains is considered to be one of the largest operators of oil pipelines in North America with operations in Texas, California, and North Dakota, among other areas.
