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Occidental Pretroleum downsizes its portfolio to enhance liquidity

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Occidental’s strategic initiatives

As we saw in the previous part of this series, in 2014, Occidental Petroleum—in an effort to streamline its exploration and production business—managed to spin off a number of its assets.

By downscaling its portfolio, the company has made its operations manageable in the face of a turbulent market environment, leaving it with a comfortable liquidity position.

We discussed some of Occidental’s key strategic initiatives in a previous article. Of these, the company was successful in selling a portion of its investment the Plains All American Pipeline, as we discussed in the previous part of this series. The company also sold its Hugoton gas properties and interests in the BridgeTex pipeline during the quarter. Plus, Occidental completed its California assets spin-off to form an independent and separately traded company, California Resources Corporation.

Stephen I. Chazen, president and chief executive officer, said in a news release, “The steps we have taken during our strategic review will result in a greater ability to concentrate Occidental’s resources in areas where we have key competitive advantages.”

All these steps have left the company with a comfortable cash position of $7.8 billion.

This cash could go toward share buybacks and efficient capex deployment in 2015. We’ll talk about these options in detail in the following part of this series.

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Occidental’s divestitures stem from the company’s objective to focus only on core assets in the US and the Middle East. Other companies that followed asset divestment programs in 2014 include Chevron (CVX) and Chesapeake Energy (CHK). All these companies combined make up ~18% of the Energy Select Sector SPDR ETF (XLE) and approximately 3.5% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

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