Occidental Petroleum hasn’t closed the acquisition of Anadarko yet, but analysts are already speculating about which Anadarko assets Occidental could divest to cut part of the debt it has taken on from the transaction and to focus on the core assets after the deal—Anadarko’s prime U.S. shale acreage.
The sooner Occidental delivers on its non-core asset sales, the sooner it can start consolidating complementary assets with Anadarko to achieve synergies and regain some favor with investors, shareholders, and the market, mergers and acquisitions (M&A) analysts and bankers tell Reuters.
When Oxy announced earlier this month that it had entered into a deal to buy Anadarko—outbidding Chevron—Occidental said it “expects to reduce debt over the next 24 months through free cash flow growth, realizing identified synergies and executing a planned portfolio optimization strategy with $10-15 billion of divestitures over the next 12-24 months; $8.8 billion of which has already been agreed through the transaction with Total.”
The deal with Total, however, may not go as smoothly as initially expected, after Algeria’s Energy Minister Mohamed Arkab said over the weekend that the North African country would not allow Total to acquire Anadarko’s assets, because Algeria’s government had not been consulted on the matter and is now ready to exercise its pre-emption right.
Algeria quickly came down off that stance, with its energy minister acquiescing enough to say it was open to a “good compromise” for a Total/Anadarko deal, according to S&P Global Platts.
According to analysts who spoke to Reuters, Occidental’s most likely asset sales could be Anadarko’s pipeline business and the assets in the Gulf of Mexico. Anadarko’s GoM position may be worth at least US$6 billion, and potential buyers could be some of the biggest players with experience in the Gulf of Mexico such as Exxon, Shell, Chevron, and Total, analysts tell Reuters.
If the deal with Total for Anadarko’s African assets goes through and Oxy sells the offshore assets, it would likely reach its US$10-15 billion asset sale target, Matt Sallee, portfolio manager at Tortoise Capital Advisors, told Reuters.
When Occidental approached Anadarko in late April with a bid countering Chevron’s, rating agency Moody’s said that the proposed deal would add almost US$40 billion of debt to OXY’s capital structure. Moody’s placed OXY under review for downgrade, noting that if the acquisition closes and crude oil prices remain supportive, “OXY would likely emerge from the review with a weakly positioned investment grade rating.”