Oxy execs explain Williston Basin asset sale

By Luke Geiver | October 28, 2015

Occidental Petroleum Corp.’s reported sale of its Williston Basin acreage and assets became official today during the company’s third quarter update. Although previously reported amounts for asset sale values were incorrect, Stephen Chazen, Oxy’s president and CEO, said the transaction of the sale should be complete before the end of the fiscal year. The sale should net Oxy roughly $600 million.

According to the company, the principal goal is now to target and shape its business to low oil prices. To do that, Oxy believes it must focus on its own core assets, especially those in the Permian Basin of Texas.  Oxy’s North Dakota acreage cannot compete with its positions in the Permian, regardless of the North Dakota’s acreage’s classification as a tier one, two or three geographical asset.

With a reduced 2016 budget plan, Oxy said it didn’t believe there was any way to allocate the necessary capital needed to effectively services its Williston Basin assets. The company is intent on working in the Permian Basin due to its economies of scale and deep inventory of remaining drilling locations. “We just can’t see a situation where we could invest in it [Williston Basin] given what we have in the Permian,” Chazen said. The sale of the Williston Basin assets is a statement that says the company doesn’t see how Williston Basin assets can compete for capital next year, given the company’s focus on the Permian Basin, Chazen added.

Regarding the sale of the assets, which earlier this year were believed to be worth more by some analysts, the company said it believed the $600 million was a fair price given the prospects its management team was looking at.

In addition to non-core asset sales, the company is also looking to pull back activities in other areas around the globe, including the Middle East. In response to a question on the plans of Iraq or other Middle East countries that Oxy works with, Chazen said that if the countries were feeling pressure or stress from the price of oil and its fiscal impact on their respective country budgets, none would share it with the Oxy team. But, Chazen did say many of the countries are talking about the possibility of raising money. The countries also continually supply the message that they are aligned, he said.