Oxy May Keep Some Western Midstream Ops: Morgan Stanley

HOUSTON (P&GJ) — A month after acquiring Anadarko, Occidental Petroleum is targeting $10-15 billion in asset sales but might accomplish this without divesting all of Western Midstream's operations, according to a Morgan Stanley report.

(photo: Western Midstream)

During investor meetings hosted by Morgan Stanley in New York and Boston, Oxy management said it views the company's Plains GP Holdings units as "non-core" assets, but that no decisions have been made on its stake in Western Midstream, equity analyst Devin McDermott reported.

"Management does see value in the existing strategic relationship with (Western Midstream Partners) and the stable cash flow that the distributions provide," McDermott wrote, adding:

"We continue to believe a partial sale to deconsolidate the WES debt, rather than a full sale, is a likely outcome. Separately, the sale of APC's Africa assets to Total remains on track. Each asset sale can close individually, with Mozambique likely closing first by the end of this year and Algeria still on track for 1Q20."

The largely upbeat Morgan Stanley report concluded Oxy management is on the right track, following the meetings with CEO Vicki Hollub and CFO Cedriv Burgher.

"Just one month after closing the acquisition of APC, planned integration, debt reduction via asset sales, and execution on synergies are all on track," according to McDermott's report. "Furthermore, management has already begun to identify incremental value creation opportunities across APC's footprint, presenting potential upside to synergy targets and cash flow projections."

Shareholders of Anadarko Petroleum Corp voted Aug. 8 to sell the company for $38 billion to rival Occidental, which outbid an initial buyout offer from Chevron Corp. for The Woodlands, Texas-based Anadarko.

The deal solidified Oxy's position as a major player in the top U.S. shale field—the Permian Basin.  Anadarko held nearly a quarter million acres in the Permian, which has become the world's most prolific oilfield.

It has been widely speculated since before the deal closed that Oxy might sell Western Midstream, Anadarko's natural gas pipeline business.  Shortly after the Anadarko shareholders vote, Oxy named new executives from within its own ranks to run Western Midstream.

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