Key Stats for OXY Stock
- Price Change for $OXY stock: -7%
- Current Share Price: $44.23
- 52-Week High: $56.59
- $OXY Stock Price Target: $51.18
What Happened?
Occidental Petroleum (OXY) stock dropped more than 7% on Thursday after the company announced the sale of its chemical business, OxyChem, to Warren Buffett’s Berkshire Hathaway for $9.7 billion in cash.
The deal represents Berkshire’s largest acquisition since it paid $11.6 billion for Alleghany, an insurer, in 2022.
OxyChem manufactures chemicals used in water treatment, pharmaceuticals, healthcare, and commercial applications.
Occidental plans to use $6.5 billion of the proceeds to pay down debt, with the remaining $1.5 billion after taxes going to strengthen the balance sheet. The company expects to save more than $350 million annually in interest expense once the deal closes.
CEO Vicki Hollub framed the sale as a strategic pivot that will allow Occidental to focus entirely on its core oil and gas operations.
The debt reduction will finally get Occidental below its $15 billion debt target set after last year’s CrownRock acquisition. That milestone should enable the company to resume share buybacks, which have been on hold while management has worked to deleverage.
Berkshire already owns 28.2% of Occidental’s common stock, making it the company’s largest shareholder.
Buffett first got involved in 2019 when he helped finance Occidental’s purchase of Anadarko Petroleum with a $10 billion commitment.
He received preferred shares that paid an 8% dividend, plus warrants to purchase common stock. Hollub said Occidental plans to start redeeming those preferred shares in 2029 as cash builds on the balance sheet.
See analysts’ growth forecasts and price targets for OXY stock (It’s free!) >>>
What the Market Is Telling Us About OXY Stock
The 7% decline in OXY stock suggests investors aren’t thrilled about the company selling off a profitable business, even if it does help the balance sheet.
OxyChem has been a steady cash generator, and losing that diversification means Occidental becomes a pure play on oil and gas prices.
Management’s pitch is that the sale will “unlock” shareholder value by allowing the company to accelerate development of what it calls a “20+ year low-cost resource runway.”
Occidental highlighted more than $2 billion in annualized cost savings achieved in its U.S. onshore operations since 2023. It plans to focus capital on high-return projects in the Delaware Basin, Midland Basin, and other core areas while advancing enhanced oil recovery technologies.
Occidental has been trying to reduce its balance sheet debt amid an elevated interest rate environment. Its long-term debt is largely tied to the Anadarko deal that Buffett helped finance in 2019.
While reaching the sub-$15 billion debt target is progress, investors may question whether selling a quality asset is the best way to achieve it.
Meanwhile, Greg Abel, who will succeed Buffett as Berkshire CEO in 2026, called Oxychem “a robust portfolio of operating assets, supported by an accomplished team.”
Berkshire last made a chemical acquisition in 2011, when it bought Lubrizol for approximately $10 billion, so this type of deal aligns with the conglomerate’s playbook.
For Occidental shareholders, the silver lining is that management can finally restart buybacks and provide additional capital returns.
Hollub said on CNBC that getting debt down faster “resolves the one outstanding issue” holding back OXY stock. Whether that optimism proves warranted will depend on oil prices, the company’s execution of its drilling programs, and whether investors buy into the pure-play oil and gas story.
Berkshire is sitting on a record $344 billion in cash, so the $9.7 billion price tag barely dents its buying power.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
