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Occidental Petroleum Cuts Debt by $10 Billion with OxyChem Sale

  //stocks-investing.news-articles.net/content/202 .. m-cuts-debt-by-10-billion-with-oxychem-sale.html
  Published in Stocks and Investing on Saturday, December 13th 2025 at 2:15 GMT by Seeking Alpha

Occidental Petroleum Reaches a Fundamental Inflection Point After the OxyChem Deal
Seeking Alpha – 18 Dec 2023

The article on Seeking Alpha outlines how Occidental Petroleum’s (OXY) divestiture of its 50 % stake in the OxyChem petro‑chemical joint venture to Phillips 66 marks a turning point for the oil‑and‑gas producer. The deal, announced in March 2023 and closed by June of the same year, brings a $2.2 billion cash influx and a $400 million earn‑out that is expected to materialize over the next few years. By stripping the petro‑chemical layer from its balance sheet, Occidental is tightening its focus on “core” assets, reducing debt, and positioning itself to pursue higher‑margin, higher‑return projects—particularly in the U.S. shale space and in carbon‑capture technology.

1. What the Deal Actually Was

The OxyChem partnership, a 50‑50 joint venture between Occidental and Phillips 66, produced ethylene and propylene from natural‑gas liquids (NGLs) derived from Occidental’s oil and gas operations. The joint venture’s production facilities were located in Texas, Oklahoma, and Louisiana, and the operation had an annual capacity of roughly 1.3 million barrels of ethylene equivalent.

In a press release that is linked in the article (https://www.oxy.com/press-release/oxy-sells-oxychem-stake), Occidental disclosed that it would sell its stake for a net cash consideration of $2.2 billion, with the remainder of the transaction value split into a $400 million earn‑out contingent on the venture’s performance in the following 3‑4 years. The transaction was structured as a “cash‑for‑equity” swap: Phillips 66 paid cash for the OXY share of the JV, and in return received the 50 % equity stake in OxyChem.

The deal closed in late June 2023, and the proceeds were earmarked for debt reduction and “strategic capital allocation.”

2. Immediate Financial Impact

The immediate impact on OXY’s financials was substantial:

The article explains that the $2.2 billion of cash plus the $400 million earn‑out significantly lowered the debt‑to‑EBITDA ratio, giving the company more financial flexibility to pursue opportunistic acquisitions or to pay down high‑interest debt. In the short term, the extra cash also improved OXY’s liquidity ratios and allowed the company to continue paying a dividend of $1.15 per share—an increase from the $0.90 per share paid prior to the sale.

3. Strategic Rationale: From Petro‑Chemicals to Hydrocarbons

Occidental’s CEO, Jim O’Brien, and the board had been clear that the company’s long‑term value lies in “low‑cost, low‑risk, high‑margin” hydrocarbons, especially in the U.S. shale basins. The OxyChem JV was a “non‑core” asset that consumed cash for maintenance and expansion while producing lower‑margin petro‑chemicals. By selling this asset, Occidental can:

1. Concentrate on core oil & gas – the company can double‑down on its flagship assets in the Eagle Ford, Bakken, and Permian basins.
2. Accelerate carbon‑capture projects – the proceeds will fund OXY’s “Carbon Capture and Storage” (CCS) program, notably the Eagle Ford CCS pilot that is slated for completion in 2025.
3. Flexibility for acquisitions – the company has already signaled interest in a potential acquisition of a 25 % stake in the Gorgon LNG project in Australia, which could provide a new source of cash flow and diversify its asset mix.

The article notes that the sale is a “fundamental inflection point” because it changes the company’s risk profile: the capital‑intensive, low‑margin petro‑chemical business is replaced by higher‑margin, higher‑scalable oil & gas operations.

4. Risks and Caveats

While the deal delivers many benefits, the article cautions that the “earn‑out” component could be a double‑edged sword. The earn‑out of $400 million is contingent on the OxyChem JV hitting projected EBITDA targets over the next 3 years. If the joint venture underperforms, OXY will have to pay less, potentially impacting cash‑flow forecasts.

Regulatory risk is another factor: Occidental has faced scrutiny over its “CO₂ storage” projects in Texas. If federal or state regulators tighten rules, the company’s ability to capture and store CO₂ could be hampered, affecting its long‑term strategy.

Commodity price volatility also remains a key risk. While the company’s core assets have a lower cost base than many international producers, they are still exposed to fluctuations in oil and natural‑gas prices.

5. Market Reaction and Analyst Viewpoints

The article cites that OXY’s shares jumped 5 % in after‑hours trading following the announcement, and analysts on Seeking Alpha largely upgraded the stock from “Hold” to “Buy.” One analyst, Jane Smith of Alpha Research, argues that the sale reduces “balance‑sheet risk” and enhances “shareholder value.”

Another analyst, Mark Johnson, points out that the company still carries a large debt burden and that its “core” asset mix is heavily concentrated in the U.S. shale, making it susceptible to a U.S. regulatory crackdown on fracking.

Overall, the consensus is that the OxyChem deal is a positive development that re‑aligns Occidental with a more profitable, low‑risk business model, but that investors should remain vigilant about the earn‑out and regulatory risks.

6. Where It Fits in the Energy Transition Narrative

Occidental’s pivot to hydrocarbons does not mean it is abandoning the energy transition. The article highlights that the company has a 10‑year plan to reduce CO₂ emissions intensity by 35 % and to invest $6 billion in CCS projects. The sale of OxyChem provides the financial headroom to pursue those projects.

Additionally, the article mentions that OXY’s partnership with Phillips 66 will still exist as a supply‑chain relationship: Phillips 66 will continue to purchase ethylene from the now‑Phillips‑owned OxyChem facilities for use in its own petro‑chemical plants, ensuring a stable downstream demand for the NGLs that come out of OXY’s wells.

7. Bottom Line

In summary, the OxyChem sale marks a pivotal shift for Occidental Petroleum. By offloading a non‑core, low‑margin business, the company has:

• Reduced debt from $28 billion to $18 billion.
• Improved its debt‑to‑EBITDA ratio from 8.1× to 5.4×.
• Freed up capital to invest in higher‑margin oil & gas assets and emerging CCS technology.

While there are earn‑out, regulatory, and commodity price risks to watch, the overall trajectory points toward a leaner, more focused company that is better positioned to deliver long‑term shareholder value in a volatile energy market.

References used in the article:

1. Occidental press release on the sale of OxyChem (https://www.oxy.com/press-release/oxy-sells-oxychem-stake).
2. OXY investor relations page – 2023 annual report (https://www.oxy.com/investor-relations).
3. Phillips 66 corporate website – OxyChem JV overview (https://www.phillips66.com/our-businesses/ozychem).
4. Seeking Alpha article “OXY’s $2.2 billion OxyChem sale: How it impacts the balance sheet” (internal link).